AbstractThis article studies a new iterative method for a class of closed‐loop Hammerstein systems. The new iterative method solves the crossproducts between the parameters of the linear block and the nonlinear block by using the key term separation technique, decomposes a system into two subidentification models by utilizing the hierarchical identification principle for reduced computational complexity, and maximizes the maximum likelihood cost function by using the input and output data with a data window for improved parameter estimation accuracy. A numerical simulation example and a continuous stirred tank reactor experiment are presented to demonstrate that the proposed algorithm can work effectively.