Abstract: The measurement reference bias caused by the relative installation error between landmark sensor and star sensor is one of the primary factors degrading navigation performance. In the space environment, positioning error of the landmark navigation system is increased due to slow time-varying measurement reference bias caused by deformation of sensors and their brackets. To cope with this problem, a parametric model for in-orbit calibration of time-varying measurement reference bias was proposed. Based on the model, a parameter estimation method for measurement reference bias was designed. Using this method, celestial landmarks and stars on the celestial sphere were observed with a landmark sensor and a star sensor respectively to obtain the line-of-sight (LOS) measurements of the landmarks in the inertial reference frame. Then the measurements were processed with a navigation filter to estimate the position and velocity of the spacecraft together with the measurement reference bias parameters in real time. Numerical simulations demonstrate that the proposed method effectively mitigates the unfavorable effect of measurement reference bias, significantly improving the positioning accuracy of the navigation system.