This paper presents a compensation algorithm with software implementation for eliminating the residual voltage in a resolver. The algorithm provides lower-cost implementation and more significant effects than the existing adopted compensation coils. The paper studies the characteristics of the resolver output signals, which mainly consist of the ideal induced signal, the odd-order harmonic components and the residual voltage. First, the resolver output parameters-amplitude, phase and DC component-are estimated by signal fitting methods when the shaft stops at a certain position. Then, the three parameters are again obtained after the driving shaft rotates 180 degrees with respect to the initial position. Because the induced voltage varies with the shaft rotational angle but the residual voltage does not, the amplitude of the residual voltage is obtained by employing the trigonometric identity of the rotational angles to eliminate the amplitude of the induced signal. The experimental results indicate that the proposed compensation method can effectively eliminate the residual voltage in the induced signal and improve the measurement accuracy of the resolver sensors.