The paper describes the principle of 0.2 THz stepped-frequency radar system which is utilized to achieve a one-dimensional range profile and range resolution. Terahertz (THz) stepped frequency radar is more susceptible to the phase error which will cause the spread and shift of range profile, thus affecting the quality of the high resolution range profile and signal-to-noise ratio. Therefore, a method of phase compensation is proposed to improve the range resolution. After phase compensation, the resolution and signal-to-noise ratio are improved remarkably. The range resolution can reach centimeter scale. Experimental and simulation results indicate that THz stepped frequency radar can reach high resolution range profile with the phase compensation method, which provides a foundation for further research on two-dimensional and three-dimensional image in the THz band.