The effects of data time synchronization errors in a loosely coupled Global-Positioning-System (GPS)-aided inertial navigation system (INS) are studied and quantified in terms of the increased mean square error (MSE) of the navigation solution. An expression for evaluating the MSE of the navigation solution, given the vehicle trajectory and the model of the INS error dynamics, is derived. Thereafter, a software-based time synchronization method, where the time synchronization error is included as a state to be estimated by the data integration filter, is proposed. A practical approach to the implementation of the proposed time synchronization method is also briefly described. Moreover, an expression for the MSE of the navigation solution in the system that employs the proposed synchronization method is derived. Finally, through simulations and tests with real-world data, the correctness of the derived MSE expressions is validated, and the application of the proposed synchronization method is shown. The test results show that, with the proposed synchronization approach, a data time synchronization, which is accurate to the order of a few milliseconds, can be achieved.