The application of three-dimensional inversion of gravity and magnetic fields is very important not only in geophysical researches, but also in the study of geological structures. A formula of potential field in frequency-domain, developed by Parker in 1973, can be used as a rapid and effective algorithm in gravity and magnetic inversion. The technique has been improved then by Oldenburg, Sprenke, Feng and others.In addition to a brief introduction of Parker’s algorithm and its applications, this paper includes the following five parts: basic computational techniques, inversion of single layer, convergence and constraints, simultaneous inversion for density and topography as well as inversion of multilayers. The authors present relevant practical iterative formulas and its varieties when density distribution varies with depth in linear or exponential relation. In order to maintain computation stability and speed up iteration convergence, some approaches are taken in the program design, for instance shifting lower interface of the studied layer, inverting corrections of topography, reducing grid boundary effects and utilizing low-pass filter. With the consideration of the nonuniqueness of the inversion, a method of using seismic data to constrain the range ofpossible models is discussed. It is pointed out that the density variation generates less effects than those of topography on the spectrum of gravity anomaly in second order. Therefore density contrast and topography can be inverted simultaneously by an alternative weighting iteration. By analogy, the inversion of multilayer model can be done in the above procedure. An approach of model decomposition is useful in the computation of multilayer model. The techniques discussed in the present paper for gravitational field are also valid for magnetic field. The application of three-dimensional inversion of gravity and magnetic fields is very important not only in geophysical researches, but also in the study of geological structures. A formula of potential field in frequency-domain, developed by Parker in 1973, can be used as a rapid and effective algorithm in gravity and magnetic inversion. The technique has been improved then by Oldenburg, Sprenke, Feng and others. addition to a brief introduction of Parker’s algorithm and its applications, this paper includes the following five parts: basic computational techniques , inversion of single layer, convergence and constraints, simultaneous inversion for density and topography as well as inversion of multilayers. The authors present relevant practical iterative formulas and its varieties when density distribution varies with depth in linear or exponential relation. In order to maintain computation stability and speed up iteration convergence, some approaches are taken in the program design, for instance shifting lower interface of the studied layer, inverting corrections of topography, reducing grid boundary effects and utilizing low-pass filter. With the consideration of the nonuniqueness of the inversion, a method of using seismic data to constrain the range ofpossible models is discussed . It is pointed out that the density variation generates less effects than those of topography on the spectrum of gravity anomaly in the second order. Thus, density contrast and topography can be inverted simultaneously by an alternative weighting iteration. By analogy, the inversion of multilayer model can be done in the above procedure. An approach of model decomposition is useful in the computation of multilayer model. The techniques discussed in the present paper for gravitational field are also valid for magnetic field.