Abstract: We present a new method,named baseline method,which used for recovering the Earth's gravity field and improving some parameters of initial orbital vector simultaneously.The principle of the baseline method is introduced.The formulae of transforming between baseline parameters and typical Cartesian parameters are deduced.And the sensitivities of inter-satellite observations to baseline parameters are analyzed.The two Earth's gravity field models are recovered from GRACE data by typical method and baseline method respectively,and their accuracies are evaluated.The results show that the accumulated geoid undulation error from baseline method is less 3 cm than the one from typical method.