An improved inversion algorithm for estimating the significant wave height (SWH) from marine X-band radar image sequences is developed. To retrieve the SWH from radar image sequences of heterogeneous nearshore wave field, the principal components of the radar image were extracted by empirical orthogonal function (EOF) analysis and rotated empirical orthogonal function (REOF) analysis, respectively. REOF method makes decomposition based on EOF method, which rotates in accordance with the principal of maximum variance orthogonal rotation. The basic idea of this method is that the relationship between the SWH and the standard deviation of principal components is linear. The change of SWH measured by the buoy ranges from 0.5 to 1.7 m. For validation, these two methods are, respectively, tested against the data from in situ buoys. The results are that the correlation coefficient between the wave parameters measured by the buoy and restored from radar image sequences using the EOF analysis is 0.85, and that using the REOF analysis is 0.90, whereas the root-mean-square error using EOF analysis is 0.20 m for SWH, and that using REOF analysis is 0.17 m. The results indicate that the effect of the REOF method is better than that of the EOF method.