The nine-degree-freedom dynamic model of the parachute-munition system is developed by the theories and the analysis methods of parachute dynamics and multibody dynamics. On the basis of the above model, a linear five-degree-offreedom dynamic model is developed by linearization at the steady state. A new algorithm, which can be fused with submunition kinematics and used in target identification, is developed by the principle of parachute dynamics. The simulation program is developed and used to remove the influence of wind gust on hitting accuracy. The successful airdrop test demonstrates that the new method can be used in the guidance of smart munition.