The cross-correlation technique has been widely used for leakage detection of buried pipes, and this technique can be successfully applied when the leakage signal has a high signal-to-noise ratio. In the case of a power plant, the measured leakage signals obtained from the sensors may contain background noise and mechanical noise generated by adjacent machinery. In such a case, the conventional method using the cross-correlation function may fail to estimate the leakage point. In order to enhance the leakage estimation capability of a buried pipe in a noisy environment, an improved cross-correlation technique is proposed. It uses a noise rejection technique in the frequency domain to effectively eliminate the tonal noise due to rotating machinery. Experiments were carried out to verify the validity of the proposed method. The results show that even in a tonal noisy environment, the proposed method can provide more reliable means for estimating the time delay of the leakage signals.