The tracking and data relay satellite (TDRS) in geosynchronous orbit (GEO) can provide ranging and communication services for user spacecraft in low Earth orbit (LEO) through the inter‐satellite link (ISL). The time delay of TDRS ISL transponder in orbit differs from its pre‐launch state and changes due to the complex space environment, adding significant errors to the user spacecraft's orbit determination based on four‐way ranging data. The authors have developed a calibration system and proposed an efficient on‐orbit calibration method for the ISL transponder's time delay in TDRS. Experimental results demonstrate the effectiveness of the authors’ method, and the RMS of calibration residuals is less than 0.5 m. We have developed a calibration system and proposed an efficient on‐orbit calibration method for the ISL transponder's time delay in TDRS. Experimental results demonstrate the effectiveness of our method, and the RMS of calibration residuals is less than 0.5 meters.