In this paper we suggest a development of surface defect inspection algorithms for cold mill strip. The defects which exist in a surface of cold mill strip have a scattering or singular distribution. This paper consists of preprocessing, feature extraction and defect classification. By preprocessing, the binarized defect image is achieved. In this procedure, Top-hit transform, adaptive thresholding, thinning and noise rejection are used. Especially, Top-hit transform using local min/max operation diminishes the effect of bad lighting. In feature extraction, geometric, moment and co-occurrence matrix features are calculated. For the defect classification, multilayer neural network is used. The proposed algorithm showed 15% error rate.