Although the rational function model (RFM) is widely applied in photogrammetry, the application of terrain-dependent RFM is limited because of the requirement for numerous ground control points (GCPs) and the strong correlation between the coefficients. A new method, NRBOS, based on nested regression was proposed to select the optimal RPCs automatically and to gain stable solutions of terrain-dependent RFM using a small amount of GCPs. Different types of images, including QuickBird, SPOT5, Landsat-5, and ALOS, were involved in the tests. NRBOS method performed better than conventional methods in estimating RPCs, and even provided a reliable solution when less than 39 GCPs were used. Additionally, the test results showed that the simplified RPCs are almost as accurate as the vendor-provided RPCs. Consequently, in favorable situations such as when the orientation parameters of the satellite are not available or are not suffi ciently accurate, the proposed method has the potential to take the place of the regular terrain-independent RFM.