A new algorithm by iterative least-squares fitting in phase shifting interferometry is presented. If the reference mirror has tilt and piston errors caused by phase-shifting, the phase shifts of the pixels along the same interferogram are not a constant, but they are still kept on the same plane. So solving this plane can eliminate the errors. The first order Taylor series expansion replaces the non-linear equation used in solving this plane, and thus simplifies the algorithm. By iterative, the accuracy can be guarantied. The validity of this algorithm has been examined by means of computer simulation.