Speckle is a primary factor which degrades the contrast resolution and masks the meaningful texture information present in an ultrasound image. Its presence severely hampers the interpretation and analysis of ultrasound images. When speckle reduction technique is applied for visual enhancement of ultrasound images, it is to be kept in mind that blurring associated with speckle reduction should be less and fine details are properly enhanced. With these points in consideration, the modified speckle reduction anisotropic diffusion (MSRAD) method is proposed in the present study to improve the visual quality of the ultrasound images. In the proposed MSRAD method, the four neighboring pixel template in speckle reduction anisotropic diffusion (SRAD) method of Yu and Acton (IEEE Trans Image Process 11:1260-1270, 2002) have been replaced by a new template of larger number of neighboring pixels to calculate the diffusion term. To enhance visual quality of ultrasound images, nonquadratic regularization (Yu and Yadegar, Proceedings of the IEEE international conference on image processing, 2006) is incorporated with MSRAD method and accordingly changes in parameter settings have been made. The performance of MSRAD method was evaluated using clinical ultrasound images, interpretation by the medical experts and results of MSRAD method by subjective and objective criteria.