Disclosed herein is a wafer processing method for dividing a wafer into a plurality of individual devices along a plurality of crossing division lines. The wafer is composed of a substrate and a functional layer formed on the front side of the substrate. The division lines are formed on the front side of the functional layer. A laser beam having a transmission wavelength to the substrate is applied to the wafer from the back side thereof to detect the height of an interface between the functional layer and the substrate in an area corresponding to each division line. The depth of cut by a cutting blade for cutting the substrate is next set according to the height detected above. The back side of the substrate is next cut by the cutting blade according to the depth of cut set above to thereby form a cut groove having a depth not reaching the functional layer with a remaining part of the substrate left between the bottom of the cut groove and the functional layer along each division line, the remaining part having a uniform thickness. Thereafter, the remaining part and the functional layer are cut along each division line to thereby divide the wafer.