1. A method for producing a noise-reduced digital color image, comprising: (a) providing an image having panchromatic pixels and color pixels corresponding to at least three color photoresponses; (b) providing from the image a panchromatic image and interpolating the panchromatic image to provide a full-resolution panchromatic image; (c) using the full-resolution panchromatic image and neighboring same color pixel values to produce a noise-reduced color pixel and repeating this step for each color pixel; and (d) interpolating the noise-reduced color pixels to produce interpolated color pixels to thereby provide a noise-reduced digital color image.