There is a problem that rotor position estimation accuracy is affected by the parameter variation of a permanent magnet synchronous motor (PMSM). Thus a nonlinear compensation strategy for position estimation error based on the maximum output power per current is proposed. First, the influence of motor parameter error, especially inductance error, on the precision of position estimation is analyzed. The correlation model between position estimation error and output power per unit current is established, and the relationship model between inductance error and optimal output power is derived. Then, combined with the power model, a polynomial inductance error nonlinear model is constructed. By fitting the polynomial model with a few test points, the error inductors can be identified and used to accurately compensate for the position estimation errors. The proposed method is simple, independent of motor parameters, and can effectively overcome noise interference. Finally, simulation and experimental results verify the effectiveness of the proposed compensation strategy.