This paper describes the design, evaluation and implementation of a compensating algorithm for an iron-cored 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 of the CT. The proposed algorithm decomposes the exciting current into the core loss current and the magnetizing current and each of them is estimated. The core loss current is calculated from the secondary voltage and the voltage-core loss current curve. The core flux linkage is calculated and then inserted into the flux-magnetizing current curve to estimate 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 secondary current. The voltage-core loss current curve and flux-magnetizing current curves, which are different from the conventional curves, are derived in this paper. The performance of the proposed algorithm is validated under various conditions using EMTP generated data. The experimental test results of an iron-core type electronic CT, which consists of the iron-core and the compensation board, are also included. 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 CT.