To improve the navigation precision of autonomous underwater vehicles, a terrain-aided strapdown inertial navigation based on Improved Unscented Kalman Filter (IUKF) is proposed in this paper. The characteristics of strapdown inertial navigation system and terrain-aided navigation system are described in this paper, and improved UKF method is applied to the information fusion. Simulation experiments of novel integrated navigation system proposed in the paper were carried out comparing to the traditional Kalman filtering methods. The experiment results suggest that the IUKF method is able to greatly improve the long-time navigation precision, relative to the traditional information fusion method.