Although epistasis is an important phenomenon in the genetics and evolution of complex traits, epistatic effects are hard to estimate. The main problem is due to the overparameterized epistatic genetic models. An epistatic genetic model should include potential pair-wise interaction effects of all loci. However, the model is saturated quickly as the number of loci increases. Therefore, a variable selection technique is usually considered to exclude those interactions with negligible effects. With such techniques, we may run a high risk of missing some important interaction effects by not fully exploring the extremely large parameter space of models. We develop a penalized maximum likelihood method. The method developed here adopts a penalty that depends on the values of the parameters. The penalized likelihood method allows spurious QTL effects to be shrunk towards zero, while QTL with large effects are estimated with virtually no shrinkage. A simulation study shows that the new method can handle a model with a number of effects 15 times larger than the sample size. Simulation studies also show that results of the penalized likelihood method are comparable to the Bayesian shrinkage analysis, but the computational speed of the penalized method is orders of magnitude faster.