Phasor Measurement Units (PMUs) utilize three-phase current and voltage transformers to obtain input signals from which the phasors are estimated. In general the instrument transformers have Ratio Correction Factors (RCFs) which can be determined by conducting on-site calibration tests. These calibration tests are expensive and time-consuming and rarely performed on a system-wide basis. The errors introduced by the unknown RCFs are assumed to be a part of the overall measurement error. A novel approach of the Wide Area Measurement System (WAMS) is to use the phasor measurements to automatically calibrate all the instrument transformers from which phasor data is obtained. This technique is based upon having access to at least one set of three phase voltage transformers (reference transformers) with known accurate Ratio Correction Factors. Potential Transformers (PTs) or special accurate Capacitive Voltage Transformers (CVTs) are often available as a source of reference for this purpose. This paper explains the theory of this calibration procedure, and using simulations on a power system model. It is shown that very accurate RCFs of all the current and voltage transformers can be obtained. This calibration function is being implemented on the Dominion Virginia Power (DVP) System. It is of course implied that any other measurement system - for example SCADA - which uses the same instrument transformers will benefit from this calibration procedure.