This paper describes a wavelet based approach to derivative spectroscopy. The approach is utilized to select, through optimization, optimal channels or bands to use as derivative based remote sensing algorithms. The approach is applied to airborne and modeled or synthetic reflectance signatures of environmental media and features or objects within such media, such as benthic submerged vegetation canopies. The technique can also applied to selected pixels identified within a hyperspectral image cube obtained from an board an airborne, ground based, or subsurface mobile imaging system. This wavelet based image processing technique is an extremely fast numerical method to conduct higher order derivative spectroscopy which includes nonlinear filter windows. Essentially, the wavelet filter scans a measured or synthetic signature in an automated sequential manner in order to develop a library of filtered spectra. The library is utilized in real time to select the optimal channels for direct algorithm application. The unique wavelet based derivative filtering technique makes us of a translating, and dilating derivative spectroscopy signal processing (TDDS-SP ® ) approach based upon remote sensing science and radiative transfer processes unlike other signal processing techniques applied to hyperspectral signatures.