Based on the detailed studying on the principles and methods of laser interferometry for setting accuracy of parallel axis on hybrid NC machine tools, the setting accuracy and resetting accuracy of parallel axis in Z direction has been inspected by interferometry and the characteristic curve of mean position deviation for parallel axis was plotted, by which the mathematical model of positional error for parallel axis in linear displacement was derived. The positional errors compensation model and increment compensation curve of parallel axis have been obtained by making use of least squares fitting. The position of parallel apparatus moving platform and length of the drive rods have been solved. The setting accuracy of parallel axis on hybrid NC machine tools was compensated. The methods of laser interferometry of setting accuracy and model building of error compensation for parallel axis were proposed.