Abstract: In this paper, we describe the use of threshold modulation to remove the visual artifacts contained in the variable-coefficient error-diffusion algorithm. To obtain a suitable parameter set for the threshold modulation, a cost function used for the search of optimal parameters is designed. An optimal diffusion parameter set, as well as the corresponding threshold modulation strength values, is thus obtained. Experiments over this new set of parameters show that, compared with the original variable-coefficient error-diffusion algorithm, threshold modulation can remove visual anomalies more effectively. The result of the new algorithm is an artifact-free halftoning in the full range of intensities. Fourier analysis of the experimental results further support this conclusion.