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Considering ongoing developments in Photogrammetry and Remote Sensing and attending to their applications such as digital true orthophoto generation from high resolution images, have already proven the urgency and necessity of approaches for generating DEM as input of these applications. In this research we describe a novel method for automatic DEM generation. We describe “Semi-Global Matching” algorithm then implement and test it for generating an initial disparity image from high resolution stereo satellite images. Furthermore, post-processing steps for removing outliers, recovering from specific problems of structured environments and the interpolation of gaps are needed, to generate an accurate disparity map. With generating a clear disparity map we can generate 3d point clouds. Then these point clouds are used for generating a precise DEM for other applications.