Abstract. Extracting surface land-cover types and analyzing changes are among the most common applications of remote sensing. One of the most basic tasks is to identify and map surface water boundaries. Spectral water indexes have been successfully used in the extraction of water bodies in multispectral images. However, directly applying a water index method to hyperspectral images disregards the abundant spectral information and involves difficulty in selecting appropriate spectral bands. It is also a challenge for a spectral water index to distinguish water from shadowed regions. The purpose of this study is therefore to develop an index that is suitable for water extraction by the use of hyperspectral images, and with the capability to mitigate the effects of shadow and low-albedo surfaces, especially in urban areas. Thus, we introduce a new hyperspectral difference water index (HDWI) to improve the water classification accuracy in areas that include shadow over water, shadow over other ground surfaces, and low-albedo ground surfaces. We tested the new method using PHI-2, HyMAP, and ROSIS hyperspectral images of Shanghai, Munich, and Pavia. The performance of the water index was compared with the normalized difference water index (NDWI) and the Mahalanobis distance classifier (MDC). With all three test images, the accuracy of HDWI was significantly higher than that of NDWI and MDC. Therefore, HDWI can be used for extracting water with a high degree of accuracy, especially in urban areas, where shadow caused by high buildings is an important source of classification error. © The Authors. Published by SPIE under a Creative Commons Attribution 3.0 Unported License. Distribution or reproduction of this work in whole or in part requires full attribution of the original publication, including its DOI.