In the study, a method to analyze the effect of position sensitive detector (PSD) on the performance of laser tracing measurement system is proposed. The PSD measurement principle is analyzed, and the PSD measurement model is established in the laser tracing measurement system. A simulation model of the laser tracking measurement system is built using Matlab/Simulink software, and the influence of the displacement voltage conversion coefficient of PSD on the performance of the laser tracing measurement system is simulated and analyzed. Simulation results show that when the displacement voltage conversion coefficient αp is 1000 m/V, the response time of PSD is short, the overshoot of the dynamic response of the laser tracing measurement system is low, the stability time is short, and the dynamic overshoot error is small. Experimental results show that the greater the αp, the greater the voltage error output by the PSD photoelectric conversion circuit, and the greater the impact on the performance of the laser tracing measurement system. When αp=1000 m/V, the error of the output voltage of the PSD photoelectric conversion circuit is the lowest, and the stabilization time is the shortest.