This paper presents a minimum error thresholding (MET) algorithm under the hypothesis that the gray level histogram of SAR image fits to a mixture model of shifted Rayleigh distribution. This algorithm is applied to real SAR images and compared with traditional Otsu algorithm and other MET algorithms based on various models of histogram. The hypothesis of using Rayleigh distribution model is confirmed by Kolmogorov-Smirnov testing and the comparison results obtained show that the proposed new algorithm has good performance in thresholding SAR images.