A multiscale Retinex image enhancement algorithm in HSV space based on illumination compensation is proposed to solve the under exposure of images acquired in low-light conditions. First, in HSV space, the intrinsic protrusion and illumination compensation layers both replace the original luminance component. Then, the intrinsic protrusion layer is processed by improved bilateral kernel function (IBKF), and the reflection layer is obtained according to multiscale Retinex. The illumination compensation layer is processed by optimizing the bilateral Gamma function through sparrow search, and firefly disturbance is introduced in the later stage of sparrow search to make it converge to the global optimum faster. The illumination layer is extracted from the brightness transition layer. Finally, the reflection and illumination layers are fused, and color space conversion is employed to generate the final output image. The experimental results show that the proposed algorithm improves the illumination loss in the process of image enhancement as well as image clarity and obtains better visual perception.