A vision system for a vehicle includes a color camera disposed at a vehicle and having an exterior rearward field of view. The color camera includes an imaging array of photosensing pixels and at least one color filter disposed at or in front of at least some of the photosensing pixels. An image processor is operable to process image data captured by the color camera. Processing of captured image data by the image processor includes utilization of a color correction algorithm that includes a color correction matrix. The color correction matrix algorithm may utilize a 3×3 color correction matrix. The color correction algorithm may include a color correction matrix algorithm and a histogram algorithm that function to determine a color correction for the captured image data.