A new concept 'Factor Analysis technique’ for array processing is introduced in this paper.The model which Factor Analysis considers closely resembles the data model received by array.So the properties of it have been proven useful to estimate the source numbers for DOA estimation.This paper presents the algorithmic approach of least square criterion to estimate the source number and spatially colored noise from the covariance matrix of received signals based on Factor Analysis model.The estimation performance is illustrated by computer simulation with comparisons to traditional methods.