A Small AUV Navigation System (SANS) is being developed at the Naval Postgraduate School. The SANS is an integrated INS/GPS navigation system composed of low-cost, small-size components. It is designed to demonstrate the feasibility of using a low-cost Inertial Measurement Unit (IMU) to navigate between intermittent GPS fixes. This thesis presents recent improvements to the SANS hardware and software. The 486-based ESP computer used in the previous version of SANS is now replaced by an AMD 586DX133 based PC/104 computer to provide more computing power, reliability and compatibility with PC/104 industrial standards. The previous SANS navigation filter consisting of a complementary constant gain filter is now aided by an asynchronous Kalman filter. This navigation filter has six states for orientation estimation (constant gain) and eight states for position estimation (Kalman filtered). Low- frequency DGPS noise is explicitly modeled based on an experimentally obtained autocorrelation function. Ocean currents are also modeled as a low-frequency random process. The asynchronous nature of GPS measurements resulting from AUV submergence or wave splash on the DGPS antennas is also taken into account by adopting an asynchronous Kalman filter as the basis for the SANS software. Matlab simulation studies of the asynchronous filter have been conducted and results documented in this thesis.