Nanosatellites are proliferating as low-cost, dedicated remote sensing opportunities for small nations. However, nanosatellites’ performance as remote sensing platforms is impaired by low downlink speeds, which typically range from 1200 to 9600 bps. Additionally, an estimated 67% of downloaded data are unusable for further applications due to excess cloud cover. To alleviate this issue, we propose an image segmentation and prioritization algorithm to classify and segment the contents of captured images onboard the nanosatellite. This algorithm prioritizes images with clear captures of water bodies and vegetated areas with high downlink priority. This in-orbit organization of images will aid ground station operators with downlinking images suitable for further ground-based remote sensing analysis. The proposed algorithm uses Convolutional Neural Network (CNN) models to classify and segment captured image data. In this study, we compare various model architectures and backbone designs for segmentation and assess their performance. The models are trained on a dataset that simulates captured data from nanosatellites and transferred to the satellite hardware to conduct inferences. Ground testing for the satellite has achieved a peak Mean IoU of 75% and an F1 Score of 0.85 for multi-class segmentation. The proposed algorithm is expected to improve data budget downlink efficiency by up to 42% based on validation testing.