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A new approach is presented in this paper to produce Digital Elevation Model (DEM) in mountainous areas with steep slope using ERS-½ tandem data. In order to reduce the impact of phase errors on the Interferometric Synthetic Aperture Radar (InSAR)-generated DEM, an external DEM such as that from Shuttle Radar Topography Mission (SRTM) is utilized in this approach. The proposed algorithm includes two steps: The first step is to model and remove phase trends with a linear regression analysis before converting phase to height; the second step is to filter unreliable height points before interpolating the DEM from the InSAR height map. The critical points are the following: 1) determining the one-to-one correspondence between the interferogram and the SRTM DEM before knowing the InSAR-derived elevation values and 2) estimating the elevation range of every pixel from SRTM DEM. To solve the first problem, an iteratively geocoding algorithm is performed. A DEM interpolation error model solves the second one. For InSAR data processing, the SRTM DEM is not only usable for modeling systematic phase errors but also for filtering gross height errors. The experiments in Zhangbei and the Three Gorges areas in China show that our approach has improved the accuracy of the resulting DEMs significantly without any ground control points. [ABSTRACT FROM AUTHOR]