This paper proposes a compensating algorithm for the secondary current of the measurement current transformer (CT) that removes the effects of the hysteresis characteristics of the iron-core. The exciting current resulting from the hysteresis characteristics of the core causes an error between the primary current and the secondary current of the measurement CT. The exciting current can be decomposed into the magnetizing current and the core loss current. The core loss current is obtained from the measured secondary current and the core loss resistance. The core flux linkage is calculated by integrating the measured secondary current, and then inserted into the flux-magnetizing current curve to obtain the magnetizing current. The exciting current at every sampling interval is obtained by summing the core-loss and magnetizing currents and then added to the measured current to obtain the correct current. The performance of the proposed algorithm is validated under various conditions using EMTP generated data. The results indicate that the proposed algorithm can improve the accuracy of the measurement CT significantly, and thus reduce the size and the cost of the measurement CT.