Aiming at the mutual interference problem which exists in a system based on Gaussian minimumshift keying （GMSK）+ pseudonoise code（PN）technique, a interference cancellation technique is proposed. Firstly, the ranging signal is removed from the received signal before telemetry demodulation by subtracting the regenerated ranging signal, which improves the telemetry signal to noise ratio. Secondly, channel decoding is implemented to correct errors output by the telemetry demodulator, which ameliorates the reconstructed ranging signal. The proposed algorithm is simulated to obtain bit error rate of telemetry data, ranging precision and PN code capture performance. The simulation results show that the interference of the ranging signal on telemetry data is effectively restrained and the influence of telemetry data errors on the reconstructed ranging signal is suppressed. The telemetry data, ranging precision and PN code capture performance are improved.