Laser tracking systems, such as the Leica LTD 500, are used for precision position measurement of large or distant objects, for example, the alignment of aircraft wings or bridge girders during assembly. A laser tracker’s performance is theoretically better than other common metrology equipment, such as coordinate measuring machines (CMMs). It is desirable that a flexible laser tracking system replaces the standard CMM, but measurement accuracy is highly dependent on the accuracy of its rotating mirror mechanism and its link dimension variance during tracker manufacture and assembly. Therefore this study presents a skew-ray tracing method for modeling and sensitivity analysis of laser tracking systems. First, the geometric relations of position-detector and interferometer readings are derived in terms of the laser tracker’s parameters using skew-ray tracing method. Effects of corner-cube alignment errors on sensor readings are also investigated theoretically, and it is found that misalignment of the corner-cube causes errors in path length and, therefore, misestimation of distance. Effects of mirror mechanism dimension errors are also investigated by sensitivity analysis. This study will be of use to theoretical and practical studies involving the modeling, design, and use of laser tracking systems and similar devices.