This paper proposes a magnetic compass fault detection method for GPS/INS/Magnetic compass integrated navigation systems. The fault is assumed to be caused by the hard iron and soft iron effect and modeled as an abrupt change in the magnetic compass output. In order to detect the fault, a test statistic related with only azimuth error measurement is determined. When a fault is detected, the GPS/INS/Magnetic compass integrated navigation system is changed into a GPS/INS integrated navigation system mode. In order to show the validity of the proposed method, computer simulation and van testing are carried out. The simulation and van test results show that the proposed navigation system gives more accurate outputs than the GPS/INS/Magnetic compass without the proposed method.