Quantitative techniques based on ultrasound backscatter are promising tools for ultrasonic tissue characterization. There is a need for fast and accurate processing strategies to obtain consistent estimates. An improved parameter estimation algorithm for the homodyned K distribution was developed based on SNR, skewness, and kurtosis of fractional-order moments. From the homodyned K distribution, estimates of the number of scatterers per resolution cell (μ parameter) and estimates of the ratio of coherent to incoherent backscatter signal energy (k parameter) were obtained. Furthermore, angular compounding was used to reduce estimate variance while maintaining spatial resolution of subsequent parameter images. Estimate bias and variance from Monte Carlo simulations were used to quantify the improvement using the new estimation algorithm compared to existing techniques. Improvements due to angular compounding were quantified by the decrease in estimate variance in both simulations and measurements from tissue-mimicking phantoms and by the increase in target contrast. Finally, the new algorithm was used to derive estimates from two kinds of mouse mammary tumors for tissue characterization. The new estimation algorithm yielded estimates with lower bias and variance than existing techniques. For a typical pair of parameters (μ=5 and k=1), the bias and variance were reduced 67% and 16%, respectively, for the μ parameter estimates and 79% and 37%, respectively, for the k parameter estimates. The use of angular compounding further reduced the estimate variance, e.g., the variance of estimates for the μ parameter from measurements was reduced by a factor of approximately 90 when using 120 angles of view. Finally, statistically significant differences were observed in parameter estimates from two kinds of mouse mammary tumors using the new algorithm. These improvements suggest estimating parameters from the backscattered envelope can enhance the diagnostic capabilities of ultrasonic imaging.