A rotary system includes a rotor, a vector-based position sensor, and a controller executing a method to eliminate fundamental harmonic position measurement error. The sensor measures angular position of the rotor and outputs raw sine and cosine signals representative of the angular position. The raw signals have a fundamental harmonic position measurement error at the frequency of the sensor signals. The controller receives the raw signals, adaptively adds or subtracts sensor signal offsets to or from the raw signals to generate offset sine and cosine signals, calculates a corrected position of the rotor using the offset sine and cosine signals eliminating the fundamental error, and controls an action or state of the rotary system using the corrected position. The rotor may be part of an electric machine, such as in a vehicle.