There are not many high-precision, portable digital compass solutions available right now that can enhance combined navigation systems’ overall functionality. Additionally, there is a dearth of writing about these products. This is why a tunnel magnetoresistance (TMR) sensor-based high-precision portable digital compass system is designed. First, the least-squares method is used to compensate for compass inaccuracy once the ellipsoid fitting method has corrected manufacturing and installation errors in the digital compass system. Second, the digital compass’s direction angle data is utilized to offset the combined navigation system’s mistake. The final objective is to create a high-performing portable TMR digital compass system that will enhance the accuracy and stability of the combined navigation system (abbreviated as CNS). According to the experimental results, the digital compass’s azimuth accuracy was 4.1824° before error compensation and 0.4580° after it was applied. The combined navigation system’s path is now more accurate overall and is closer to the reference route than it was before the digital compass was added. Furthermore, compared to the combined navigation route without the digital compass, the combined navigation route with the digital compass included is more stable while traveling through the tunnel. It is evident that the digital compass system’s design can raise the integrated navigation system’s accuracy and stability. The integrated navigation system’s overall performance may be somewhat enhanced by this approach.