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Urban navigation applications of the global positioning system (GPS) suffer from the problem of multipath propagation caused by complex signal reflections in local environments. The resulting errors of ranging can finally lead to an unacceptable degradation of positioning accuracy for many GPS applications. To mitigate the multipath effects in GPS receivers, an approach based on a hypotheses testing wavelet thresholding filter and the real-time noise estimation is proposed. Integrated into the code and carrier tracking loops of GPS receivers, this technique extracts the multipath tracking errors, which are applied directly to compensate the pseudorange and carrier-phase measurements due to the multipath effect. Simulation results indicate that under a fairly severe multipath scenario in urban navigation environments, the proposed method achieves the improvement of the positioning accuracy at the expense of a little additional computation load.