It has been recognized that the compressibility of hydraulic fluid, which is characterized by the value of its bulk modulus, heavily affects on the system behavior and performance. In practice, the value of the oil bulk modulus varies by the operational and structural characteristics of the hydraulic system. This study presents the theoretical derivation of the effective bulk modulus and describes an experimental impulse technique that allows accurate measurement of oil effective bulk modulus with pressure variation in a hydraulic system. Experimental and analytical results show that the value of the effective bulk modulus varies a lot in low pressure region by the effect of entrained air, while the effective bulk modulus can be estimated just using the oil and container bulk modulus on the other high pressure region.