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The dominant navigation system for small civilian UAVs today is based on integration of inertial navigation system (INS) and global navigation satellite system (GNSS). This strategy works well to navigate the UAV, as long as proper reception of GNSS signal is maintained. However, when GNSS outage occurs, the INS-based navigation solution drifts very quickly, considering the limited quality of IMU(s) employed in INS for small UAVs. In beyond visual line of sight (BVLOS) flights, this poses the serious danger of losing the UAV and its eventual falling down. Limited payload capacity and cost for small UAVs, as well as the need for operating in different conditions, with limited visibility for example, make it challenging to find a solution to reach higher levels of navigation autonomy based on conventional approaches. This thesis aims to improve the accuracy of autonomous navigation for small UAVs by at least one order of magnitude. The proposed novel approach employs vehicle dynamic model (VDM) as process model within navigation system, and treats data from other sensors such as IMU, barometric altimeter, and GNSS receiver, whenever available, as observations within the system. Such improvement comes with extra effort required to determine the VDM parameters for any specific UAV. This work investigates the internal capability of the proposed system for estimating VDM parameters as part of the augmented state vector within an extended Kalman filter (EKF) as the estimator. This reduces the efforts required to setup such navigation system that is platform dependent. Multiple experimental flights using two custom made fixed-wing UAVs are presented together with Monte-Carlo simulations. The results reveal improvements of 1 to 2 orders of magnitude in navigation accuracy during GNSS outages of a few minutes' duration. Computational cost for the proposed VDM-based navigation does not exceed 3~times that of conventional INS-based systems, which establishes its applicability for online application. A global sensitivity analysis is presented, spotting the VDM parameters with higher influence on navigation performance. This provides insight for design of calibration procedures. The proposed VDM-based navigation system can be interesting for professional UAVs from at least two points of view. Firstly, it adds little to no extra hardware and cost to the UAV. Secondly and more importantly, it might be currently the only way to reach such significant improvement in navigation autonomy for small UAVs regardless of visibility conditions and electromagnetic signals reception. Possibly, such environmental condition independence for navigation system may be needed to obtain certifications from legal authorities to expand UAV applications to new types of mission.