We describe a methodology to quantify and separate the errors of inherent optical properties (IOPs) derived from ocean-color model inversion. Their total error is decomposed into three different sources, namely, model approximations and inversion, sensor noise, and atmospheric correction. Prior information on plausible ranges of observation, sensor noise, and inversion goodness-of-fit are employed to derive the posterior probability distribution of the IOPs. The relative contribution of each error component to the total error budget of the IOPs, all being of stochastic nature, is then quantified. The method is validated with the International Ocean Colour Coordinating Group (IOCCG) data set and the NASA bio-Optical Marine Algorithm Data set (NOMAD). The derived errors are close to the known values with correlation coefficients of 60–90% and 67–90% for IOCCG and NOMAD data sets, respectively. Model-induced errors inherent to the derived IOPs are between 10% and 57% of the total error, whereas atmospheric-induced errors are in general above 43% and up to 90% for both data sets. The proposed method is applied to synthesized and in situ measured populations of IOPs. The mean relative errors of the derived values are between 2% and 20%. A specific error table to the Medium Resolution Imaging Spectrometer (MERIS) sensor is constructed. It serves as a benchmark to evaluate the performance of the atmospheric correction method and to compute atmospheric-induced errors. Our method has a better performance and is more appropriate to estimate actual errors of ocean-color derived products than the previously suggested methods. Moreover, it is generic and can be applied to quantify the error of any derived biogeophysical parameter regardless of the used derivation.