Lunar craters stand out visually among the features on the Moon. In this paper, a new automated approach to detect and extract lunar craters is proposed, and four steps are used: 1) gradient index is used to obtain polygon vector feature of crater wall on the basis of the characteristics of craters’ shape and structure; 2) the minimum bounding rectangle method was proposed and adopted to extract pseudo-centers and pseudo-diameters of craters; 3) the work of researching crater rim crest is performed, with the pseudo-center as the search center; and 4) the method to determine a circle based on three points is applied to determine true-centers and true-diameters of craters. In this study, Chang’e-I’s CCD image and DEM data obtained from CCD stereo camera are used. It proved that the method was able to be applied to other areas of the lunar surface and used in the subsequent lunar crater forming mechanism research and geological age determining work based on the crater size-frequency distribution measurement technique.