Aiming at solving two key problems namely main shaft movement error (MSME) separation and the signals’ denoising existing in improving the measurement accuracy of the roundness on-machine measurement, a new roundness on-machine measurement method was proposed. In this method, the improved reverse method (IRM) was introduced to minimize the influence of the MSME on the roundness error. Wavelet transform based denoising technique was applied to separate the noise and the high frequency components from the roundness signals. The experimental results show that the measurement accuracy of the proposed method nearly reaches that of the coordinate measuring machine, the relative error is 4% on average, and the repeatability is nearly the same. 