This letter presents a novel application of iterated function system (IFS) based three-dimensional (3D) fractal interpolation to compression elevation data. The parameters of contractive transformations are simplified by a concise fractal iteration form with geometric meaning. A local iteration algorithm is proposed, which can solve the non-separation problem when Collage Theorem is applied to find the appropriate fractal parameters. The elevation data compression is proved experimentally to be effective in reconstruction quality and time-saving.