The complex and variable ocean environment introduces complex noise to the signal received by microelectromechanical systems (MEMS) vector hydrophones, which seriously affects target location. To improve the detection efficiency and broaden the application range of vector hydrophone, this paper proposed a novel modified Wavelet packet de-noising method, known as the Wavelet packet energy (WPE) de-noising method. This method utilizes Shannon entropy to determine the optimal decomposition levels of Wavelet packets, and calculates the energy of reconstructed signals in each frequency band to construct feature vectors. The Wavelet packet with the larger energy is selected to reconstruct the signal until the root mean square error of the original signal and the reconstructed signal is minimized. thereby obtaining an optimal solution. The performance of this proposed method is evaluated through both indoor and outdoor experiments. The experimental results demonstrate that the developed method is effective in Direction of Arrival (DOA) estimation of single frequency signals and is feasible in low signal-to-noise ratio situations. The method improves the azimuth discrimination ability of the Minimum Variance Distortionless Response algorithm, and DOA estimation errors are all within 1°. Furthermore, the indoor and outdoor experiments also demonstrate that the WPE de-noising method solves the group delay and distortion of signals caused by conventional filtering.