The main objective of image fusion is to obtain an enhanced image with more relevant information by integrating complimentary information from two source images. In this paper, a novel image fusion algorithm based on discrete wavelet transform (DWT) and cross bilateral filter (CBF) is proposed. In the proposed framework, source images are decomposed into low and high frequency subbands using DWT. The low frequency subbands of the transformed images are combined using pixel averaging method. Meanwhile, the high frequency subbands of the transformed images are fused with weighted average fusion rule where, the weights are computed using CBF on both the images. Finally, to reconstruct the fused image inverse DWT is performed over the fused coefficients. The proposed method has been extensively tested on several pairs of multi-focus and multisensor images. To compare the results of proposed method with different existing methods, a variety of image fusion quality metrics are employed for the qualitative measurement. The analysis of comparison results demonstrates that the proposed method exhibits better results than many other fusion methods, qualitatively as well as quantitatively.