Provided is an image processing apparatus that can effectively display an image by using an optimized dynamic range compression technique and a method of processing an image by using the same. The method includes: obtaining a first blurred image and a second blurred image from the input image; estimating illuminance of the input image by combining the first blurred image and the second blurred image; generating a dark region amplified image from the input image; generating a bright region conserved image from the input image; applying weights to the dark region amplified image and the bright region conserved image, respectively, according to the estimated illuminance; and combining the weighted dark region amplified image and the weighted bright region conserved image to generate a final image.