For spotlight synthetic aperture radar (SAR) on circular trajectories, the phase error caused by motion error is 2-D space-variant. For the conventional motion compensation (MOCO) algorithm, the imaging scene is generally segmented into many sub-regions to compensate for the space-variant phase error. However, the complex phase error results in that fact that it is difficult to obtain the quantitative criterion of scene segmentation. To address this issue, we propose a novel MOCO algorithm. This method contains three steps; the first step is non-space-variant phase error compensation; the second step is to remove the height term; the third step is space-variant phase error compensation. Among these steps, the most critical operation is removing the height term. In the distance equation, the height term is independent of the ground target coordinate. Hence, it can be removed by a serial of operations containing resampling and phase compensation. Through removing height term, it doesn’t only compensate the height error but also makes the residual phase error into 1-D space-variant. Then, the phase error is exclusively related to the radius error and the target abscissa. Hence, after compensating for the space-variant error, it only needs to segment scene along the abscissa direction. Meanwhile, it can gain the quantitative criterion of scene segmentation to guarantee the phase error variation range is less than $\pi /{4}$ in each sub-scene. Eventually, some simulations are conducted to illustrate that the proposed method is valid.