A new denoising method based on parameter optimized Morlet wavelet is put forward. The Morlet wavelet is chosen as the mother wavelet because its shape is similar to the mechanical shock signals. The mother Morlet wavelet is improved by adding two parameters which decide the shape of the mother wavelet in time domain. The added parameters and the appropriate scale parameter for the wavelet transformation are designed by the cross validation method. Finally, the useful components of the signal can be obtained by the improved Morlet wavelet denoising method. The gear fault diagnosis experimental result shows that the proposed method has a good denosing performance and it is effective in fault feature extraction.