The invention relates to a bad data identification and estimation method for a power grid. The method comprises the following steps: reading a power grid model and a plurality of measurement sections; performing state estimation on the measurement sections one by one; performing suspicious parameter or measurement detection; performing parameter or measurement error cooperative identification; and performing parameter estimation. The invention provides an overall error decline index based novel method, so that not only can effective identification and estimation of a single measurement or parameter error be realized but also cooperative identification of measurement errors and parameter errors can be realized efficiently and accurately when the measurement errors and the parameter errors exist at the same time, the process is free of repeated iterations, the calculation amount is reduced, and the efficiency and accuracy of parameter identification and estimation are improved.