This article investigates water coupled nonlinear ultrasonic testing to characterize dislocation density in Aluminum 1100 specimens. The different levels of dislocation densities are introduced to the samples by applying different levels of plastic strain at tensile loading. The ultrasonic testing includes 2.25 MHz transducer as transmitter and 5.0 MHz transducer as receiver in an immersion tank. In order to reduce the error introduced by Fourier Transform to obtain the amplitudes of the first and second harmonics, Wavelet Transform is applied to the transient data, and the wave amplitudes are identified after the wave is decomposed into its harmonics. The results of Fourier Transform and Wavelet Transform are compared, and concluded that Wavelet Transform provides more reliable reading in wave harmonic amplitudes. While water has significant nonlinearity within itself, the immersion ultrasound results agree with the literature of oil coupled ultrasound as well as the scanning electron microscopy (SEM) and Rockwell C hardness results of the specimens that the nonlinearity coefficient increases with the increase of dislocation density in aluminum.