This Thesis addresses the topic of the extraction of Digital Elevation Models (DEMs) from the in-track stereo images acquired by IKONOS satellite. Research on this topic is mainly motivated by the need of DEMs in trasportation and the potential use of very high resolution satellite stereo images to replace the traditional aerial photography to generate the DEMs that may be used for preliminary planning and location issues, limiting expensive and time consuming photogrammetry work to the final alignment corridor.In this thesis, two methods for DEM extraction from IKONOS stereo images using a modified Rational Function Model (RFM) and the 3D physical model developed at the Canada Centre for Remote Sensing (CCRS) are used and the accuracy of the DEMs generated using these two models are evaluated. The nominal accuracy of ground points determined with the vendor-supplied RPCs is evaluated and systematic biases are found. A significant improvement in the DEM accuracy is made by removing the biases in both the image and ground domain with the information of ground control. DEMs are automatically generated bya chain of processes using the PCI Geomatica OrthoEngine software package with the refined RFM and 3D physical model, respectively. The DEMs from these two methods are then compared in a desktop ERDAS Imagine environment and the accuracy of the DEMs is evaluated by comparing the extracted DEMs with the DEM from airphotos. The DEMs generated using different mathematical models have a very good consistence and more than 97% of the difference between the generated DEMs and the DEM from airphotos is between -2 m to 2m.