Counterfeit notes are one of the major issue in money transactions. In a growing country like India, it is becoming big problem for the economy. As the advances in printing and scanning technologies are developing, it is very easy for any person to print counterfeit notes with use of latest hardware machines. Identifying counterfeit notes in manual way takes a lot of time and manpower. Hence there is requirement of automation technique using which the counterfeit currency recognition process can be done effectively. Many methods have been proposed and implemented with MATLAB. By using Discrete cosine transform (DCT) algorithm blocks of the image are represented by coefficients of DCT. So, due to the presence of blocking articrafts in DCT, it is a drawback for this method. Hence, We have implemented a counterfeit note detection unit with a different algorithm which uses discrete wavelet transform (DWT) in MATLAB. This paper is another attempt on the same project to give a better solution for counterfeit currency problem.