Homologous feature point extraction is a key problem in the optical and synthetic aperture radar (SAR) image registration for islands. A new feature point extraction method using a threshold shrink operator and non-subsampled wavelet transform (TSO-NSWT) for optical and SAR image registration was proposed. Moreover, the matching for this proposed feature was different from the traditional feature matching strategies and was performed using a similarity measure computed from neighborhood circles in low-frequency bands. Then, a number of reliably matched couples with even distributions were obtained, which assured the accuracy of the registration. Application of the proposed algorithm to SPOT-5 (multi-spectral) and YG-1 (SAR) images showed that a large number of accurately matched couples could be identified. Additionally, both of the root mean square error (RMSE) patterns of the registration parameters computed based on the TSO-NSWT algorithm and traditional NSWT algorithm were analyzed and compared, which further demonstrated the effectiveness of the proposed algorithm. The algorithm can supply the crucial step for island image registration and island recognition.