［Purposes］Improved dynamic line loss and sparse optimization methods are used to study the operation error estimation of smart meters. ［Methods］First, considering the sparsity of meter error, the sparse regular term is added to improve the dynamic line loss model and improve the accuracy of error estimation. Furthermore, ADMM algorithm is used to improve the design iteration algorithm, and the dynamic line loss model is solved alternately to obtain the error estimation results of smart meters. ［Results］The numerical simulation experiment is performed by using MATLAB and actual data to verify the effectiveness of the proposed method. ［Conclusions］The results show that the coupling relationship between line loss rate and measurement error estimation is analyzed, and the accuracy of error estimation is improved. Compared with the dynamic line loss model, the detection accuracy of the proposed method is better.