A novel method of dimensional measurement using machine vision, which is called Landmark Tracking System, has been developed. Its advantages come form tracking only the bright, standard shaped "landmarks" which are made from retroreflective sheets. In the design of the LTS, it is essential to know the relationship between optical parameters and their influence on system performance. Such optical parameters include the brightness of landmark image, the illumination system design, and the choice of imaging optics. And the performance of retroreflective material also plays important role in the LTS performances. Influences of such optical parameters on LTS's dimensional measurement characteristics are investigated, with respect to the retroreflective material, the imaging optics, and the illumination system. Measuremtn errors due to parameter variations are also analyzed. Experiments are performed with a LTS prototype. Retroreflective characteristics are verified, and the LTS's measurement performances are measured in the form of repeatability and accuracy. Experimental results shgow that the LTS has repeatability better than 1/30,000 of a field of view(30 degrees), and accuracy better tha 1/3,000 of a field fo view.d fo view.