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The purpose of this study is to discuss the influence of signal nonlinearity upon X-band radar observations. A method for estimating the degree of nonlinearity by bispectral analysis was applied and discussed. We found that bispectral analyses from spatial radar backscatter series are similar to results obtained from water level time series. In addition, the average nonlinear degree from radar backscatter is related to wind speed. The accuracy of wave observations derived by consideration of the nonlinear effect from radar backscatter was also investigated. The estimated error in wave height from the radar data is also related to the degree of nonlinearity. In order to improve accuracy, the modulation transfer function method was applied in order to eliminate the influence of nonlinearity.