Abstract: Traditional FFT can effectively analyze the sinusoidal signal, but the very big error exists for analyzing the similar frequency sinusoidal signal. In this article, adopting Least Square (LS) method which can separate similar frequency sinusoidal signal is put forward. Characteristic parameters of separating similar frequency sinusoidal signal can be identified by satisfying termination criterion of 2-norm minimum and solving overdetermined equations on observation matrix. The simulation result shows that each component of similar frequency signal such as amplitude, phase angle can be separated from original signal, the interference of noise can effectively be restrained, noise stability and the frequency domain analysis ability become better, so the efficiency and precision of signal processing can be raised.