This document presents a new color image segmentation approach based on overlap wavelet transform (OWT). OWT extracts wavelet features to better separate different patterns in an image. The proposed method also uses morphological operators and 2D histogram clustering for effective segmentation. It is concluded that the proposed OWT method improves segmentation quality, is reliable, fast and computationally less complex than direct histogram clustering. When tested on various color spaces, the proposed segmentation scheme produced better results in RGB color space compared to others. The main advantages are its use of a single parameter and faster speed.