This paper proposes a novel method for Small Unmanned Helicopter (SUH) system identification based on Improved Particle Swarm Optimization (IPSO). In the proposed IPSO, every particle will do a local search as a “self-check” before updating the global velocity and position. Then, the global best particle is created by a certain number of elitist particles in order to get a rapid rate of convergence during calculation. Thus both the diversity and convergence speed can be taken into consideration during a search. Formulated by the first principles derivation, a state-space model is built for the analysis of dynamic modes of an experimental SUH. The helicopter is equipped with an Attitude Heading Reference System (AHRS) and the corresponding data storage modules, which are used for flight test data measurement and recording. After data collection and reconstruction, the input and output data are utilized to determine the corresponding aerodynamic parameters of the state-space model. The predictive accuracy and fidelity of the identified model are verified by making a time-domain comparison between the responses from the simulation model and the responses from actual flight experiments. The results show that the characteristics of the experimental SUH can be determined accurately using the identified model and the new method can be used for SUH system identification with high efficiency and reliability.