This paper presents a new nar-rowband interference rejection algorithm in direct-sequence spread spectrum systems which combinestime-frequency analysis and lapped transform to re-ject narrowband interference. First the lapped trans-form decomposes a multi-component signal into anumber of subband signals, then Wigner distributionis applied to them. In time-frequency domain thenarrowband interfer-ence is located and rejected bythreshold algorithm. At last the reconstructed signalis sent to matched filter. The algorithm is suitable forboth stationary and non-stationary signal. Computersimulation results are given and are compared withother transform-domain algorithms.