Harmonic drives are increasingly used in precision positioning applications such as military radars, wafer handling machines, and satellite cameras. Precision tracking performance of these drives is deteriorated by nonlinear transmission attributes including kinematic error, flexibility, hysteresis and friction. Hence characterization and compensation of these nonlinear attributes is crucial to improve the precision in tracking and regulation. This paper focuses on modeling, identification, and compensation of nonlinear friction in harmonic drives. Harmonic drive friction models presented in the literature are found to be a combination of Coulomb and viscous friction. However, a dynamic friction phenomenon exhibits, in addition to Coulomb and viscous frictions, other nonlinear phenomena including the Dahl effect, and the Stribeck effect which must be considered in an accurate friction model. In addition, in this research, harmonic drive friction is discovered to be dependent on the motor position. Complete characterization of friction in harmonic drives is carried out in this paper by using a recently developed LuGre (Lund-Grenobel) friction model superimposed with a new position-dependent part. Parameters of the proposed model are identified using linear and nonlinear identification tools. Experimental implementation of a friction compensation scheme based on the proposed model demonstrates the effectiveness of the model.