Variation of the effective moment of inertia due to load disturbance in a CNC feed drive system may increase control error for each axis of motion and thereby degrading total precision including contouring accuracy. Although some investigations have been made on estimation and control of variation of the effective moment of inertia, most of them are for individual axis control: there has been no research that considered the improvement of contouring accuracy in CNC machine tools under load variation. In this paper, a real-time inertia compensation method is proposed including a newly defined contour error model that represents error caused by load disturbance. Position error due to load variation is calculated based on the estimated disturbance torque by a full-order disturbance observer for each drive axis. The position error is then used to establish the new contour error model considering the effect of load variation. The proposed compensation method is realized by adjusting velocity loop gains in the control system using the least square method such that the effect of variation of the effective moment of inertia on the contour error is minimized. The proposed method is evaluated with a 3-axis open CNC testbed.