It is a typical passive ranging technology that estimation of distance of an object is based on transmission characteristic of infrared radiation, it is also a hotspot in electro-optic countermeasures. Because of avoiding transmitting energy in the detection, this ranging technology will significantly enhance the penetration capability and infrared conceal capability of the missiles or unmanned aerial vehicles. With the current situation in existing passive ranging system, for overcoming the shortage in ranging an oncoming target object with small temperature difference from background, an improved distance estimation scheme was proposed. This article begins with introducing the concept of signal transfer function, makes clear the working curve of current algorithm, and points out that the estimated distance is not unique due to inherent nonlinearity of the working curve. A new distance calculation algorithm was obtained through nonlinear correction technique. It is a ranging formula by using sensing information at 3~5 and 8~12 μm combined with background temperature and field meteorological conditions. The authors’ study has shown that the ranging error could be mainly kept around the level of 10% under the condition of the target and background apparent temperature difference equal to ±5 K, and the error in estimating background temperature is no more than ±5 K.