Position sensors using magnetic effects, such as magnetic encoders (MEs), are increasingly used in many industrial applications. These include motor control, electro-mechanical braking systems, and precision measurement systems. The magnetic encoders generally provide a pair of sinusoidal signals dephasing 90 0 to each other. Unfortunately, the signals obtained are not ideal, in that they always exist with the DC offsets, different amplitudes, phase-shifts and waveform distortions. These are further compromised by noise and changes in operating conditions. This paper proposes an approach for real-time correcting and tracking ME signals based on the Advanced Adaptive Digital Phase-Locked Loop (AADPLL) technique. AADPLL provides a robust filtering characteristic as well as a wideband of input frequency. It can effectively filter noise and improve the accuracy of ME signals. AADPLL also takes advantage of tracking high-speed input signals without time-lag, unlike traditional filters. A quadrature pulse interpolator is introduced to obtain high resolution. This interpolator uses look-up tables (LUTs) to store pulse-out values in one period of MEs signals. These LUTs are reduced in size for easy implementation in Digital Signal Processor (DSP) hardware platforms. Experimental results demonstrate the effectiveness of the proposed method.