The joint effects of IQ imbalance and phase noise on OFDM systems are analyzed, and a compensation scheme is proposed to improve the system performance. The scheme consists of a joint channel estimation algorithm and a joint data symbol estimation algorithm. In the proposed channel estimation algorithm, the channel coefficients are jointly estimated with the IQ imbalance parameters and the phase noise components. Its performance is demonstrated to be close to the associated Cramer-Rao lower bound. In the proposed data symbol estimation algorithm, the joint compensation is decomposed into IQ imbalance compensation and phase noise compensation. It is shown both by theory and computer simulations that the proposed scheme can effectively improve the signal-to-noise ratio at the receiver. As a result, the sensitivity of OFDM receivers to the physical impairments can be significantly lowered, simplifying the RF and analog circuitry design in terms of implementation cost, power consumption, and silicon fabrication yield.