The present invention provides for a system and method for improvement of radio transmitter and receiver frequency accuracy for a local radio communication unit that communicates digital data with a remote communication unit. In the local unit the received radio signal is down-converted, and converted to complex baseband digital samples by an analog-to-digital converter. A downlink digital phase rotator applies a fine frequency shift to the samples in accordance with a receiver frequency offset command. The resultant baseband signal is used by the data demodulator and by a receiver frequency error estimator to obtain receiver frequency errors. A data modulator generates baseband complex samples which are shifted in carrier frequency by an integrated uplink digital phase rotator in accordance with a transmitter frequency offset command. The modulated samples are then converted by a digital-to-analog converter and upconverted in frequency for radio transmission to the remote unit. The local oscillator signals for both upconverter and downconverter are phase locked to a reference frequency generated by a VCXO. An automatic frequency control (AFC) function nulls the transmitter and receiver frequency error by the frequency adjustment commands to the uplink and downlink phase rotators or to the VCXO digital-to-analog converter (VCXO DAC) by feedback control principals based on measured receiver frequency error. During frequency track mode when communications between local and remote units are possible, the AFC only adjusts radio frequency via phase rotator commands and the VCXO command remains fixed, thereby avoiding communications performance degradation by VCXO frequency quantization error due to the VCXO DAC. The AFC adjusts VCXO frequency only during a preliminary acquisition mode prior to data communications, or to back out excessively large frequency offsets accumulated in the downlink and uplink phase rotators during track mode. When a VCXO adjustment is made in track mode, phase rotator adjustments are simultaneously applied to cancel the errors in transmitter and receiver radio frequencies caused by the step change due to VCXO frequency quantization thereby mitigating VCXO frequency quantization noise.