We demonstrate a novel method of interpreting images using an Active Appearance Model (AAM). An AAM contains a statistical model of the shape and grey-level appearance of the object of interest which can generalise to almost any valid example. During a training phase we learn the relationship between model parameter displacements and the residual errors induced between a training image and a synthesised model example. To match to an image we measure the current residuals and use the model to predict changes to the current parameters, leading to a better fit. A good overall match is obtained in a few iterations, even from poor starting estimates. We describe the technique in detail and give results of quantitative performance tests. We anticipate that the AAM algorithm will be an important method for locating deformable objects in many applications.