Abstract: The measurement reference bias caused by the relative installation error between the landmark sensor and the star sensor is one of the primary factors degrading the navigation performance. In the space environment, the positioning error of the landmark navigation system is increased due to the slow time-varying measurement reference bias caused by the deformation of the sensors and their bracket. To cope with this problem, a parametric model for the in-orbit calibration of the time-varying measurement reference bias is established. In addition, a parameter estimation method for the measurement reference bias is presented based on the model. In the method, the celestial landmarks and the stars on the celestial sphere are observed with the landmark sensor and the star sensor respectively to Obtain the Line-of-Sight (LOS) measurements of the landmarks in the inertial reference frame. Then the measurements are processed with a navigation filter to estimate the position and velocity of the spacecraft together with the measurement reference bias parameters in real time. It is demonstrated via numerical simulations that the effect of the measurement reference bias is mitigated effectively with the presented method, such that the positioning accuracy of the navigation system is improved significantly.