Modern attitude and heading reference systems (AHRS) generally use Kalman filters to integrate gyros with some other augmenting sensors, such as accelerometers and magnetometers, to provide a long term stable orientation solution. The construction of the Kalman filter for the AHRS is flexible, while the general options are the methods based on quaternion, Euler angles, or Euler angle errors. But the quaternion and Euler angle based methods need to model system angular motions, and, meanwhile, all these three methods suffer from nonlinear problems which will increase the system complexities and the computational difficulties. This paper proposes a novel implementation method for the AHRS integrating IMU and magnetometer sensors. In the proposed method, the Kalman filtering is implemented to use the Euler angle errors to express the local level frame (l frame) errors, rather than express the body frame (b frame) errors as the customary methods do. A linear system error model based on the Euler angles errors expressing the l frame errors for the AHRS has been developed and the corresponding system observation model has been derived. This proposed method for AHRS does not need to model system angular motions and also avoids the nonlinear problem which is inherent in the commonly used methods. The experimental results show that the proposed method is a promising alternative for the AHRS.