A method based on covariance differencing for a uniform linear array is proposed to counter the problem of direction finding of narrowband signals under a colored noise environment. By assuming a Hermitian symmetric Toeplitz matrix for the unknown noise, the array covariance matrix is transformed into a centrohermitian matrix in an appropriate way allowing the noise component to be eliminated. The modified covariance differencing algorithm provides accurate direction of arrival (DOA) estimation when the incident signals are uncorrelated or just two of the signals are coherent. If there are more than two coherent signals, the presented method combined with spatial smoothing (SS) scheme can be used. Unlike the original method, the new approach dispenses the need to determine the true angles and the phantom angles. Simulation results demonstrate the effectiveness of presented algorithm.