Thermal errors are among the most significant contributors to machine tool errors. Successful reduction in thermal errors has been realized through thermal error compensation techniques in the past few decades. The effectiveness of thermal error models directly determines the compensation results. Most of the current thermal error modeling methods are empirical and highly rely on the collected data under specific working conditions, neglecting the insight into the underlying mechanisms that result in thermal deformations. In this paper, an innovative temperature sensor placement scheme and thermal error modeling strategy are proposed based on the thermal mode concept. The modeling procedures for both position independent and position dependent thermal errors are illustrated through numerical simulation and experiments. Satisfactory results have been achieved in terms of model accuracy and robustness.