A method for analysis of signals containing harmonics and inter-harmonics is presented and discussed. This method is primarily developed for analysis of power system signals which contain harmonic and inter-harmonic components. However, usefulness of the proposed technique goes beyond the area of power systems and it can be employed for other applications which require accurate and adaptive extraction of unknown frequency components of a periodic signal in noisy environment. Novel structure of the proposed technique allows accurate estimation of weak components buried in noise and in the presence of large artifacts which may be located close to each other in the frequency spectrum.