Two-stage Kalman filter can sharply reduce the load of calculation, and square root filter has good stability. In order to prevent volatilization of two-stage Kalman filter and increase the speed of constringency, combined with the advantages of two-stage Kalman filter and square root filter based on sequential processing, the two-stage Kalman algorithm was improved, and the improved algorithm was also applied to on-line calibration for the SINS on vehicle carrier. The simulation results show that the improved algorithm has better stabilization, and the calculation load is reduced, and better calibration result is got compared with extend Kalman filter.