To extract quantitative information from the Enhanced Thematic Mapper-Plus (ETM+) imagery accurately, atmospheric correction is a necessary step. After reviewing historical development of atmospheric correction of Landsat thematic mapper (TM) imagery, we present a new algorithm that can effectively estimate the spatial distribution of atmospheric aerosols and retrieve surface reflectance from ETM+ imagery under general atmospheric and surface conditions. This algorithm is therefore suitable for operational applications. A new formula that accounts for adjacency effects is also presented. Several examples are given to demonstrate that this new algorithm works very well under a variety of atmospheric and surface conditions. The companion paper will validate this method using ground measurements, and illustrate the improvements of several applications due to atmospheric correction.