Polarization mode dispersion (PMD), which can be induced by circulators or even moderate lengths of optical fiber, is known to be a dominant source of instrumentation noise in fiber-based PS-OCT systems. In this paper we propose a novel PMD compensation method that measures system PMD using three fixed calibration signals, numerically corrects for these instrument effects and reconstructs an improved sample image. Using a frequency multiplexed PS-OFDI setup, we validate the proposed method by comparing birefringence noise in images of intralipid, muscle, and tendon with and without PMD compensation. (C) 2013 Optical Society of America