Polarization mode dispersion (PMD) has been recognized as a significant barrier to sensitive and reproducible birefringence measurements with fiber-based, polarization-sensitive optical coherence tomography systems. Here, we present a signal processing strategy that reconstructs the local retardation robustly in the presence of system PMD. The algorithm uses a spectral binning approach to limit the detrimental impact of system PMD and benefits from the final averaging of the PMD-corrected retardation vectors of the spectral bins. The algorithm was validated with numerical simulations and experimental measurements of a rubber phantom. When applied to the imaging of human cadaveric coronary arteries, the algorithm was found to yield a substantial improvement in the reconstructed birefringence maps. (C) 2013 Optical Society of America