We have developed a multi band digital hearing aid algorithm emphasizing feedback cancellation and a hardware module to evaluate the performance of our algorithm. The hearing aids should be able to compensate for individual hearing loss characteristics of hearing impaired person. Thus hearing aids need the function of multi-bands amplification and the capabilities of feedback cancellation that can remove howling caused by acoustic feedback. In this paper, we proposed a digital hearing aid algorithm which has multi-bands compensation using modified discrete cosine transform (MDCT) and can efficiently remove acoustic feedbacks. Moreover, we have developed digital hearing aid hardware module, which can evaluate hearing aid algorithms in real time operation. The developed algorithm and hardware module were verified through computer simulation and clinical tests. Through operational experiments, good performances in real time operation environment and an efficient howling cancellation were also observed. The developed hardware module can operate in stable condition and it is expected to become a good hardware platform for developing hearing aid algorithms.