The error diffusion method is used well for two-level dithered picture because of its high-quality processing compared with other dithering methods. It can be expanded to multi-level processing. However, the error diffusion method using multi-level processing causes significant deterioration of picture quality, when an input pixel level is near to a quantization level. In this paper, we propose a new error diffusion method to solve the above problem, which technique is to set the diffused error value with an upper limit level under the condition of the diffused error increase. The proposed method is found to be effective for image quality. In addition, we show that usual two-level error diffusion methods have a characteristic of edge emphasis.