The position and orientation system (POS) is widely applied in airborne Earth observation, which integrates the strapdown inertial navigation system (SINS) and global positioning system (GPS) to provide high-accuracy position, velocity, and attitude information for remote sensing motion compensation. However, for keeping the appointed direction of remote sensing load, the inertial measurement unit (IMU) and remote sensing load will be driven to sweep by the servo machine. The lever arms among IMU, GPS, and remote sensing load will be time varying, and their influence on the measurement accuracy of POS is serious. To solve the problem, a dynamic lever arm error compensation method is proposed, which contains the first-level lever arm error compensations between IMU and GPS and the second-level lever arm error compensation between POS and remote sensing load. The flight experiment results show that the proposed method can effectively compensate the dynamic lever arm error and achieve high measurement accuracy for POS.