The localization accuracy of the conventional three- dimensional (3D) node localization algorithm based on received signal strength (RSS) is restricted by the random signal strength fluctuation caused by the irregular propagation environments. In this paper, we propose an improved localization algorithm based on a differential RSS distance estimation algorithm to minimize the influence of the path loss exponent error. Furthermore, considering the influence of degree of irregularity (DOI), we propose a new radio model and obtain numerically the relation between DOI and the variation of signal transmission ranges. A spherical shell with certain finite thickness is then used to characterize the transmission range irregularity. The simulation results show the path loss exponent has no effect on localization error in the proposed algorithm. The localization errors for various DOIs are significantly lower than the conventional 3D algorithm for different densities of anchor nodes.