The impulses in vibration signals are used to identify faults in the bearings of rotating machinery. However, vibration signals are usually contaminated by noise that makes the process of extracting impulse characteristic of localized defect very challenging. In order to effectively diagnose bearing with noise masking vibration signal, a new methodology is proposed using integrated (i) nonlocal means- (NLM-) based denoising and (ii) improved morphological filter operators. NLM based denoising is first employed to eliminate or reduce the background noise with minimal signal distortion. This denoised signal is then analysed by a proposed modified morphological analysis (MMA). The MMA analysis introduces a new morphological operator which is based on Modified-Different (DIF) filter to include only fault relevant impulsive characteristics of the vibration signal. To improve further performance of the methodology the length of the structure element (SE) used in MMA is optimized using a particle swarm optimization- (PSO-) based kurtosis criterion. The results of simulated and real vibration signal show that the integrated NLM with MMA method as well as the MMA method alone yields superior performance in extracting impulsive characteristics of vibrations signals, especially for signal with high level of noise or presence of other sources masking the fault.