System parameters such as the inter-harmonic impedance are crucial to the identification of inter-harmonics sources. To suppress the effects of colored noise in the voltage and current signals, a method based on generalized least squares is proposed to estimate system parameters for the first time. This method eliminates the effect of the correlation between variables by converting the colored noise to the white noise firstly, and then carrying out parameters estimation with the converted data, which reduces inter-harmonic impedance estimation error compared with the conventional regression method. In addition, this paper introduces quantitative index to quantify the responsibilities at both sides combined with the national standard. Simulation analysis and practical testing data prove the method effective and feasible.