Error diffusion (ED) method is a major stream in digital halftoning, but the unpleasant wormy patterns have been disagreeable to the people who are familiar with halftone screen in the conventional printing. The major drawbacks of ED method lie in (1) wormy patterns (2) vertical textures (3) dots' delay. This paper proposes a simple and easy way to reduce these unpleasant artifacts. The wormy patterns are more noticeable in the highlight and shadow areas. The proposed modified ED algorithm employs a periodic noise whose amplitude is controlled to be higher in the highlight and shadow, while lower in the midtone areas. We named this noise the AM/ FM periodic noise. And we tried to extend this modified ED to the color. In this paper, the experimental results are reported using inkjet printer and the performance is discussed as compared with conventional ED.