With an increase in the use of autonomous underwater vehicles (AUV's) comes the desire for smaller and cheaper AUV's. Reduction in size and cost will make AUV technology more accessible to research and industrial communities. These constraints also reduce the quality of components used in the vehicle. Availability of calibration algorithms built into the sensors also diminishes. Thus, there is a need for developing automatic sensor calibration techniques. This thesis presents the theoretical and simulation results of calibration algorithms developed for an electronic magnetic compass and heading rate sensor. Development of the Autonomous Systems and Controls Laboratory's first miniature AUV is also presented.