Exhibit 99.1

| |  | 500 Spruce Tree Centre
1600 University Avenue West
St. Paul, Minnesota 55104-3825 USA
651.603.7700 Fax: 651.603.7795
www.imagesensing.com
| |  | -----------------------------------------------------------------------------------------------------------------------------------------

NEWS RELEASE

|Contacts: | Art Bourgeois, Chief Financial OfficerImage Sensing Systems, Inc. Phone: 651.603.7700
|--------- | -------------------------------------------------------------------------------------

# October 20, 8 AM CDT

# Image
Sensing Systems Announces Record Third Quarter Financial Results

Saint Paul, Minn., October 20,
2004Image Sensing Systems, Inc. (ISS) (NASDAQ Small Cap: ISNS) market leading
developer and manufacturer of video- based traffic management systems, announced today
financial results for its third quarter ended September 30, 2004, a record high for the
third quarter.

Net income for the quarter was
$977,000 ($.26 per fully diluted share), an increase of 43.5% compared with net income of
$681,000 ($.19 per fully diluted share) for the comparable period in 2003.

Net income for the nine month period
ended September 30, 2004 was $2,276,000 ($.60 per fully diluted share), an increase of
29.4% compared to net income of $1,759,000 ($.51 fully diluted share) for the same period
in 2003.

Jim Murdakes, Chairman and CEO
commented, The third quarter of 2004 was our tenth consecutive quarter where
revenue and profitability exceeded the comparable quarter of the prior year. Our major
partner, Econolite Control Products, Inc. (ECPI), had another outstanding quarter
increasing their royalties by 37% over the comparable quarter in 2003. Year-to-date
royalty income has increased 26% over the comparable 9 month period of 2003. Product
sales for the third quarter were 33% less than the comparable quarter of 2003 as several
large sales orders in Asia did not repeat in 2004. Year-to-date product sales are still
25% ahead of the comparable nine month period of 2003 indicating continued acceptance of
our Autoscope products in both Asia and Europe.

Headquartered in St. Paul,
Minnesota, Image Sensing Systems, Inc. combines expertise in image processing, hardware
and software engineering, and communications to develop video vehicle detection systems
for traffic management and control applications. The Autoscope vehicle

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Exhibit 99.1

detection system
is the world leader in video detection for advanced traffic management systems for
highways, tunnel incident detection, intersection control, and traffic data collection.
The Autoscope system provides traffic managers the means to reduce roadway congestion,
improve roadway planning, and improve cost efficiencies.

Safe Harbor Statement: Statements
made in this release concerning the Companys or managements intentions,
expectations, or predictions about future results or events are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements reflect managements current expectations or beliefs, and are
subject to risks and uncertainties that could cause actual results or events to vary from
stated expectations, which variations could be material and adverse. Factors that could
produce such a variation include, but are not limited to, the following: the inherent
unreliability of earnings, revenue and cash flow predictions due to numerous factors,
many of which are beyond the Companys control; developments in the demand for the
Companys products and services; relationships with the Companys major
customers and suppliers; unanticipated delays, costs and expenses inherent in the
development and marketing of new products and services; the impact of governmental laws
and regulations; and competitive factors. Our forward-looking statements speak only as of
the time made, and we assume no obligation to publicly update any such statements.
Additional information concerning these and other factors that could cause actual results
and events to differ materially from the Companys current expectations are
contained in the Companys Form 10-KSB for the year ended December 31, 2003.

Three and Nine Month Periods Ended
September 30, 2004 and 2003 (in thousands, except per share information)

|                                                     | Three-MonthPeriod EndedSeptember 30 |        | Nine-MonthPeriod EndedSeptember 30
|---------------------------------------------------- | ----------------------------------- | ------ | ----------------------------------
|                                                     |                                     |        |                                   
|
|                                                     |                                     |        |                                   
|Revenue                                              |                                     | $3,077 |                                   
|Operating income                                     |                                     | 1,491  |                                   
|Net income                                           |                                     | 977    |                                   
|Net income per share                                 |                                    
|Basic                                                |                                     | .28    |                                   
|Diluted                                              |                                     | .26    |                                   
|                                                     |                                    
|Weighted average number of common shares outstanding |                                    
|Basic                                                |                                     | 3,442  |                                   
|Diluted                                              |                                     | 3,818  |