India is rich in its heritage and culture. It has many historical monuments and temples where the walls are made of inscribed stones and rocks. The stone inscriptions play a vital role in portraying about the ancient incidents. Hence, the digitization of these stone inscriptions is necessary and contributes much for the epigraphers. Recently, the digitizing of these inscriptions began with the binarization process of stone inscriptions. This process mainly depends on the thresholding technique. In this paper, the binarization of terrestrial and underwater stone inscription images is preceded by a contrast enhancement and succeeded by edge-based filtering that minimizes noise and fine points the edges. A new method called modified bi-level thresholding (MBET) algorithm is proposed and compared with various existing thresholding algorithms namely Otsu method, Niblack method, Sauvola method, Bernsen method and Fuzzy C means method. The obtained results are evaluated with the performance metrics such as peak signal-to-noise ratio (PSNR) and standard deviation (SD). It is observed that the proposed method has an improvement of 49% and 39%, respectively, on an average by the metrics considered.