An iterative method for the estimation of the parameters that characterize a linear combination of sinusoids is presented. The method is based on the analysis of the generation principle of the spectrum leakage and an interpolation scheme applied to the Discrete Fourier transform. It is described as follow: 1) Estimate the parameters of the signal by traditional interpolation method; 2) obtain the leakage compensation factors by the parameters of the signal; 3) recalculate the parameters of the frequency components by the interpolation method based on leakage compensation. 4) judge the accuracy of the result. The iteration is completed if the results are acceptable in precision, otherwise, repeat 2), 3) and 4) until obtain a very satisfactory results. The simulation results, which assess the sensitivity of the noise, changing of the parameters and the influence of the changing parameters on the estimated accuracy, comparing with three typical interpolation methods, show that the proposed method has the better estimation accuracy and stability under noise and the severe long-range leakage situation, and has fast convergence rate. It can be used as an alternative method to improve parameter estimation accuracy of the discrete Fourier transform. The result on analysis the wire bounding data of the IC chip packages shows that the IIFFT method can effectively suppress the long-range leakage and improve the accuracy of parameter estimation.