Automation of wood processing is strongly required to improve the productivity and quality of wood products in wood industry which is one of the most labor-intensive industries. Classification of surface defects on wood boards such as knots is one of the important steps towards a completely automated wood processing system. In this study the possibility of detection of knots by image processing technique was investigated. Algorithm for the automatic determination of threshold value was developed to enhance the flexibility of image processing system. Two different approaches, grid method and tile method, were developed to enhance the speed in extracting features from images. Grid method showed slightly higher processing speed and tile method proved much more stable in determining threshold values. Tile size of $5{ imes}5$ pixels or $6{ imes}6$ pixels was found to be proper to get stable results with resonable processing time.