We have developed a fast algorithm for generating an equivalent source by using fast wavelet transforms based on orthonormal, compactly supported wavelets. We apply a 2D wavelet transform to each row and column of the coefficient matrix and subsequently threshold the transformed matrix to generate a sparse representation in the wavelet domain. The algorithm then uses this sparse matrix to construct the the equivalent source directly in the wavelet domain. Performing an inverse wavelet transform then yields the equivalent source in the space domain. Using upward continuation of total-field magnetic data between uneven surfaces as examples, we have compared this approach with the direct solution using the dense matrix in the space domain. We have shown that the wavelet approach can reduce the CPU time by as many as two orders of magnitude.