This paper proposes an online identification algorithm based on response error method[1]. Conventional least squares techinique suffer from the structural error[4] while the other algorithms has stability problemss. A comparision is made between recursive maximum likelihood method and this method and the performance is compared Online identification is assuming larger importance in the area of underwater systems. Especially when the system responses are slow and simultaniously the advent of powerful computing tools[2] which make use of such algorithms more attractive in implementing in the real hardware. © 1992 IEEE.