This paper presents a method to identify the position independent geometric errors of rotary axis and tool setting simultaneously using on-machine measurement. Reducing geometric errors of an ultra-precision five-axis machine tool is a key to improve machining accuracy. Five-axis machines are more complicated and less rigid than three axis machine tools, which leads to inevitable geometric errors of the rotary axis. Position deviation in the process of installing a tool on the rotary axis magnifies the machining error. Moreover, an ultra-precision machine tool, which is capable of machining part within sub-micrometer accuracy, is relatively more sensitive to the errors than a conventional machine tool. To improve machining performance, the error components must be identified and compensated. While previous approaches have only measured and identified the geometric errors on the rotary axis without considering errors induced in tool setting, this study identifies the geometric errors of the rotary axis and tool setting. The error components are calculated from a geometric error model. The model presents the error components in a function of tool position and angle of the rotary axis. An approach using on-machine measurement is proposed to measure the tool position in the range of 10 s nm. Simulation is conducted to check the sensitivity of the method to noise. The model is validated through experiments. Uncertainty analysis is also presented to validate the confidence of the error identification.