This paper proposes a compensation algorithm for the analog rotor position errors caused by nonideal sinusoidal encoder output signals including offset and gain errors. In order to achieve a much higher resolution, position sensors such as resolvers or incremental encoders can be replaced by sinusoidal encoders. In practice, however, the periodic ripples related to the analog rotor position are generated by the offset and gain errors between the sine and cosine output signals of sinusoidal encoders. In this paper, the effects of offset and gain errors are easily analyzed by applying the concept of a rotating coordinate system based on the dq transformation method. The synchronous d-axis signal component is used directly to detect the amplitude of the offset and gain errors for the proposed compensator. As a result, the offset and gain errors can be well corrected by three integrators located on the synchronous d-axis component. In addition, the proposed algorithm does not require any additional hardware and can be easily implemented by a simple integral operation. The effectiveness of the proposed algorithm is verified through several experimental results.