We study on a terrain contour matching algorithm using Radial Basis Functions(RBFs) for aided inertial navigation system for position fixing aircraft, cruise missiles or re-entry vehicles. The parameter optimization technique is used for updating the parameters describing the characteristics of an area with modified Gaussian least square differential correction algorithm and the step size limitation filter according to the amount of updates. We have applied the algorithm for matching a sampled area with a target area supposed that the area data are available from Radar Terrain Sensor(RTS) and Reference Altitude Sensor(RAS)