This paper proposes a low cost and small size attitude and heading reference system based on MEMS inertial sensors. A dual-axis rotation structure with a proper rotary scheme according to the design principles is applied in the system to compensate for the attitude and heading drift caused by the large gyroscope biases. An optimization algorithm is applied to compensate for the installation angle error between the body frame and the rotation table's frame. Simulations and experiments are carried out to evaluate the performance of the AHRS. The results show that the proper rotation could significantly reduce the attitude and heading drifts. Moreover, the new AHRS is not affected by magnetic interference. After the rotation, the attitude and heading are almost just oscillating in a range. The attitude error is about 3° and the heading error is less than 3° which are at least 5 times better than the non-rotation condition.