In order to extract the underwater acoustic signal generated by the pipeline leakage and locate the leakage source in noisy signals, a method of locating the leakage sound source based on a joint denoising method is proposed. An improved grey wolf optimization algorithm is proposed, which can quickly and optimally find the optimal parameters of the Variational Mode Decomposition (VMD). A joint denoising method combining VMD algorithm with parameter optimization and wavelet denoising algorithm is proposed to denoise the underwater leakage signals. To verify the denoising effect of the proposed method in actual underwater environments with water flow noise, an underwater leakage noise interference test is designed. The results show that the proposed method can effectively remove the noise of the original signal, and the signal time difference can be obtained and the leakage source can be located.