Firstly the indication error main source of the angle measurement system of circular grating ( eccentricity and tilt of grating disk) is studied theoretically, and the coaxial installation method of grating disk and rotating shaft is proposed. The continuous full circle angle standard device in NIM ( the measurement uncertainty is 0. 05″) is used to directly perform traceability test of the measured circular grating angle measuring system, which avoids the instrument errors introduced in the installation process of the circular grating and the indirect traceability test process ( the calibration using combined polyhedral prism and photoelectric autocollimator) . Secondly, the distribution of eccentricity, tilt and other order errors in the spectrum is analyzed using harmonic theory. Finally, the harmonic compensation is carried out for the errors caused by installation eccentricity and tilt. The experiment results show that the angle indication error of the angle measurement system is reduced from 100“ before compensation to 10” after compensation, which effectively eliminates the stable and repeatable error harmonic components caused by the installation eccentricity and tilt of grating disk.