STEP is the international standard for the computer-interpretable representation and exchange of product data. STEP physical file as the implementation method of STEP generally has a large file size which may be an obstacle of efficient use and seamless transition through network. Therefore, the compression of STEP physical file has been interested recently. In this paper, we present the compression algorithm of STEP physical file. STEP physical file is compressed by LZ77 with an appropriate search buffer size for STEP physical file and Huffman coding is applied to the result of LZ77. The proposed algorithm obtains the significant compression ratio.