We present a new combined method for separation of wave and turbulence effects in Acoustic Doppler Current Profiler (ADCP) measurements of Turbulent Kinetic Energy (TKE). TKE is conventionally calculated from ADCP measurements using the variance method, but a straightforward application of this method attributes all velocity variance, including that associated with wave action, to turbulence. This results in a significant overestimation of the true TKE; at times where significant wave height reaches 5m, the variance method may overestimate TKE by more than an order of magnitude. In this paper, we show that it is possible to achieve a more successful separation of wave and turbulent action in ADCP estimates of TKE by: 1) applying a spectral filter based on the wavelet synchrosqueezed transform to the along-beam velocities prior to calculating the TKE with the variance method, and 2) applying a statistical filter based on empirical orthogonal functions to the TKE values calculated for the entire ADCP deployment period. The performance of the method in isolating the wave action is assessed against measurements from a wave-buoy; no similar comparison is possible for the turbulent action.