An improved U-Net based convolutional neural network (CNN) is proposed in this paper for online size monitoring of iron ore pellets. The proposed CNN model is a lightweight version of U-Net. In the proposed model each convolution block of the encoder subnet consists of a concatenated $1\times 1$ and $3\times 3$ filter kernel, a batch normalization layer, and a ReLU nonlinearity. The proposed CNN model efficiently detects the pellets even under variable illumination conditions and images with overlapping pellets. The proposed model is evaluated using images of iron ore pellets acquired at the discharge end of a pelletizer disc. The proposed CNN model performs satisfactorily using $\sim $ 39% less learnable parameters, and $\sim $ 16% reduced computational cost than the original U-Net model. The proposed model outperforms the conventional U-Net, different variants of U-Nets, FCN, and SegNet in weighted IoU, BF Score, global accuracy, SSIM, and PSNR. Experimental validation also shows a good agreement between the obtained pellet size distribution and the manual sieving result. This makes the proposed algorithm suitable for online pellet size-distribution measuring instruments. This method provides a more accurate and fast size monitoring system for iron ore pellets, ideal for real-time industrial applications. The image dataset and source codes are available at the below given link. https://github.com/aryadeo/Pellet_Size_Distribution.Note to Practitioners—Due to the advent of digitalization in industries, several attempts are being made to use innovative industrial monitoring systems in steel manufacturing plants. Most of the pellet plants in steel industries use human supervision for pellet growth monitoring. In this paper, a camera-based pellet size distribution monitoring method is proposed. A novel deep learning-based algorithm is used for the detection of pellets from the captured image followed by computation of pellet size analysis. Due to low computational complexity and better accuracy, the proposed method is suitable for online pellet size distribution system development compared to other previously proposed methods. However, protection from the harsh industrial environment is required for the uninterrupted and continuous operation of the system. As a future scope, the obtained pellet size information can be used as one of the control variables in designing a control system for the automated operation of the pelletizer disc.