This article propose a parameter estimation method for of a damped sinusoidal signal by the frequency domain interpolation. The three peaks of the discrete Fourier transform (DFT) result are used in the interpolation algorithm to estimate the damping factor and signal frequency. The proposed method can achieve a high accuracy because the influence of spectrum leakage from negative frequency are completely removed during the frequency domain interpolation. The comparison of different algorithms are discussed, which confirm the effectiveness of the proposed method.