This paper presents a new motion compensation algorithm to process airborne interferometric repeat-pass SAR data. It accommodates topography variations during SAR data processing, using an external digital elevation model. The proposed approach avoids phase artifacts, azimuth coregistration errors and impulse response degradation, which usually appear due to the assumption of a constant reference height during motion compensation. It accurately modifies phase history of all targets before azimuth compression, resulting in an enhanced image quality. Airborne L-band repeat-pass interferometric data of the German Aerospace Center (DLR) experimental airborne SAR (E-SAR) are used to validate the algorithm.