This paper presents a multilayer generalization of an algebraic method of inverting frequency-domain airborne active electromagnetic (AEM) data in terms of 1-D layered earth models. The processing of the AEM data, which includes a recalibration procedure, is also outlined. The inversion is applied to synthetic fields generated from a multilayer model which is intended to approximate a measured conductivity profile of the water column in the Gulf of Mexico and to measured AEM data from a survey of the Barataria Bay estuary region of the Louisiana Gulf of Mexico coast. The inversion results from the synthetic data are in good agreement with the forward model. The conductivities calculated from the inversions of measured AEM data are compared to ground- and water-based measurements. The depth variations of the calculated electrical conductivities in the nearshore Gulf waters are in good agreement with measurements of conductivity versus depth by conductivity-temperature-depth (CTD) casts at several points on the over-the-water portion of two flight lines.