Abstract: In this study, the GMR sensor and triaxial attitude sensor were used to constitute a geomagnetic azimuth measurement system. Based on the error analysis of the triaxial GMR sensor and carrier interfering field, the study proposed an error compensation model which includes the non-orthogonal compensation, sensitivity compensation, zero compensation, hard and soft magnetic interference compensation. Meanwhile, the inversion algorithm based on model identification is studied and the parameter of error characteristics is calculated by it. After compensation, the azimuth error of the measurement system is reduced to 0.34% from 3.83% and the expected objective is realized.