In exploration for mineral deposits using stream sediment samples, a phenomenon known as dilution of metal content originating from mineralized sources should be taken into account. Dilution occurs when stream sediments originating from upstream mineralized and non-mineralized areas are mixed during transport and deposition. In the sample catchment basin approach, dilution correction is accomplished by employing Hawkes's equation (1976). Catchment area size is the correction factor used in the Hawkes's equation to correct geochemical residuals for dilution. However, the upstream area of each stream sediment sample is representative of the hydrological response and dilution capability of a drainage basin. In the present research, the Hawkes's equation was modified by incorporating drainage density of catchment basin to correct geochemical residuals for dilution. The existing and new equations were applied to stream sediment data from Iran. The results were compared using known occurrences of Au mineralization as validation points. This showed the superiority of the new technique using drainage density as a factor for correcting geochemical residuals against dilution.