The problem of multi-scale parameter estimation was studied. Based on the idea of multi-scale characteristic of signal and wavelet transform, a new multi-scale multi-sensor filtering algorithm was proposed. The concepts of 'total variation' and 'local variation' of functions are introduced to the areas of wavelet transform, and then the concept of 'contraction coefficients' is raised which significantly augments the previous theory that the updating of state estimation merely focuses on the approximations of wavelet decompositions. The Monte Carlo simulation reveals that the accuracy of estimation can be improved notably under the new theory.