The weighted K-nearest neighbor (WKNN) algorithm is one of the most frequently used algorithms for indoor positioning. However, the traditional WKNN algorithm weights the reference points’ coordinates by the inverse of the received signal strength indication (RSSI) difference, which is not accurate enough because of the exponential relationship between RSSI and physical distance. Furthermore, methods based on probabilistic model or data fusion do not consider the uneven spatial resolution of the Wi-Fi RSSI. Therefore, in order to improve the positioning accuracy of traditional location algorithms, this paper proposes a new weighted algorithm based on the physical distance of the RSSI. Experiments were conducted in an office building and the results demonstrate that the proposed method considerably outperforms the KNN, Euclidian-W-KNN, Manhattan-W-KNN, EWKNN, LiFS, and GPR in terms of positioning accuracy, which is defined as the cumulative distribution function of position error.