A wireless communication system receiver compensates a received signal containing an IQ gain imbalance prior to performing frequency correction (32). The IQ imbalance in the signal is estimated after frequency correction, providing an IQ gain imbalance estimate (?n) for subsequent IQ gain imbalance compensation. The IQ gain imbalance estimation includes formulating (38) a plurality of hypotheses (Zt) of phase error between I and Q signal components, and taking as the actual phase error the hypothesis that yields the maximum power ratio between I and Q signal components. The maximum power ratio is differentiated with the respect to the IQ imbalance estimate. The IQ gain imbalance estimate is updated as a function of its prior value(s), the maximum power ratio, and the derivative of the maximum power ratio.