Abstract: One of the difficulties to develop electromagnetic rail inspection equipment for railway vehicle is how to decrease the sensor's lift-off effect caused by moving train's fluctuation. In this paper, a kind of lift-off compensation method is designed using technique of eddy current distance measurement. The eddy current coils reflect dynamically the lift-off distance during rail inspection. Then the lift-off effect could be compensated by calculated dynamic parameter. Further, the output characteristics of the distance measurement coils were simulated using electromagnetic finite element method. Laboratory experiments have been done to test the compensating effect. The experimental comparison results show that the proposed compensation method could ensure that the output waveform of electromagnetic inspection coils could almost maintain unchanged under the conditions of with and without lift-off effect.