A direct conversion wireless transceiver typically includes a quadrature modulator for modulating a transmission signal, and a quadrature demodulator for demodulating a reception signal. In the transmitter, the modulation process converts two independent baseband signals, the in-phase signal (a.k.a. an I-channel) and a quadrature signal (a.k.a. a Q-channel) into an RF signal that propagates on the wireless communication channel. In the conversion process, the I-channel signal is shifted to the carrier frequency of the channel by mixing with a local oscillator (LO) signal. The Q-channel signal is mixed with an LO signal that is 90-degrees out of phase from the LO signal used for the I-channel. After mixing, the two signals are combined to form the RF signal. In the receiver, the I-channel and Q-channel signals are reproduced by mixing the RF signal with two LO signals at the carrier frequency that are 90-degrees out of phase with one another. In practice however, there are impairments along the transmission path and the reception path of the wireless transceiver. These impairments disrupt the 90-degree phase separation between the in-phase signal and the quadrature LO signals, and cause mismatch between the I-channel and Q-channel amplitudes, thereby causing in-phase/quadrature (IQ) imbalance between these two signals. The IQ imbalance may result in crosstalk between the I-channel and the Q-channel, which in turns creates image interference of the transmission signal and/or the reception signal. Thus, there is a need for a compensation scheme to detect and correct the IQ imbalance in a wireless transceiver.