One of the most significant error sources in radio occultation soundings are residual errors of the ionospheric correction originating from small scale ionospheric turbulence and receiver noise. These errors degrade the quality of retrievals above 35--40 km. We describe a combined algorithm of the ionospheric correction and noise reduction including the following important details: (1) fitting of climatological model, (2) dynamical estimation of signal and noise covariances using radio occultation signals above 50 km, and (3) statistically optimized retrieval of neutral atmospheric and ionospheric refraction angles from L1 and L2 measurements using background refraction angles and signal and noise covariances (optimal linear combination). This method allows for the estimation of the error covariances of the retrieved neutral atmospheric and ionospheric refraction angles. We show some examples of GPS/MET data processing and perform a statistical comparison with the retrievals obtained by UCAR and DMI/IGAM algorithms. Our algorithm was previously used in the statistical validation of GPS/MET data on the basis of ECMWF analyses.