Over the past decade, there has been significant interest in fractal coding for the purpose of image compression. However, applications of fractal-based coding to other aspects of image processing have received little attention. We propose a fractal-based method to enhance and restore a noisy image. If the noisy image is simply fractally coded, a significant amount of the noise is suppressed. However, one can go a step further and estimate the fractal code of the original noise-free image from that of the noisy image, based upon a knowledge (or estimate) of the variance of the noise, assumed to be zero-mean, stationary and Gaussian. The resulting fractal code yields a significantly enhanced and restored representation of the original noisy image. The enhancement is consistent with the human visual system where extra smoothing is performed in flat and low activity regions and a lower degree of smoothing is performed near high frequency components, e.g., edges, of the image. We find that, for significant noise variance (sigma > or = 20), the fractal-based scheme yields results that are generally better than those obtained by the Lee filter which uses a localized first order filtering process similar to fractal schemes. We also show that the Lee filter and the fractal method are closely related.