Lift-off variation causes errors in the eddy current thickness measurements of metallic plates. In this paper, we have developed an algorithm that can compensate for this variation and produce an index that is linked to the thickness, but is virtually independent of lift-off. This index, termed as the compensated peak frequency, can be obtained from the measured multifrequency inductance spectral data using the algorithm we developed in this paper. This method has been derived through mathematical manipulation and verified by both the simulation and experimental data. Accuracy in the thickness measurements at different lift-offs proved to be within 2%.Index Terms-Eddy current testing, lift-off variation, new compensation algorithm, thickness measurement.