This　paper　addresses　the　problem　of　musical　noise　introduced　by　conventional　spectral　subtraction　method　for　speech　enhancement.　A　modified　spectral　subtraction　algorithm　based　on　the　masking　properties　of　human　auditory　system　is　proposed.　In　comparison　with　Virag＇s　algorithm,　the　modification　of　proposed　method　is　made　from　four　aspects.　Firstly,　VAD(Voice　Activity　Detection)　is　substituted　by　MCRA(Minima-Controlled　Recursive　Averaging)　algorithm　to　estimate　the　background　noise;　Secondly,　the　masking　threshold　is　calculated　based　on　enhanced　speech　by　multi-band　spectral　subtraction　method;　Thirdly,　the　adaptive　parameters　of　spectral　subtraction　method　is　adjusted;　Finally,　a　modified　form　of　parametric　spectral　subtraction　is　employed.　The　performance　of　the　proposed　method　is　evaluated　under　ITU-T　G.160　standard.　The　results　shows　that,　comparing　with　the　reference　algorithms,　the　proposed　method　provides　acceptable　amount　of　signal-to-noise　ratio(SNR)　improvement　and　noise　reduction　with　a　little　impact　on　the　level　of　speech.　The　objective　speech　quality　is　improved　evidently　at　the　same　time.　©　2009　IEEE.