We discuss and implement a wavelet-modified maximum average correlation height (MACH) filter for 0°–360° in-plane rotations in a hybrid digital–optical correlator. Use of a wavelet transform improves the performance of the MACH filter by reducing the number of filters that are required to identify a target rotated at any angle between 0°\text{\hspace{0.17em} and \hspace{0.17em}}360° in-plane rotations and enhances the autocorrelation peak intensity significantly. The output of a hybrid digital–optical correlator contains two autocorrelation peaks and a strong dc. Using a chirp function with the wavelet-modified MACH filter, the correlation signals are focused in three different planes. Thus placing a peak-capturing CCD camera at a particular plane, only one autocorrelation peak is recorded, discarding the strong dc and other autocorrelation peaks. A signal-to-noise ratio has been calculated as a metric of goodness of the proposed wavelet-modified MACH filter.