We investigated a high-precision grating interferometer displacement measurement system that can be applied to high-end immersion lithography machines and explained its composition and measurement algorithm. By analyzing the optical path variation caused by the installation error of the grating interferometer, we calculated the influence of the installation error on the displacement measurement. A displacement measurement model of a grating interferometer using three read heads was established, and the influence of the model coefficients on the displacement measurement model was analyzed. The simulation results show that, under the condition that the error of the measurement model in the X direction and the Y direction is <0.1  nm, the translation error of the read head should be within ±100  μm, and the relative rotation deviation between the two read heads or two gratings placed along the diagonal should be within ±50  μrad. The methods and results of studying the influence of grating interferometer installation error on the displacement measurement provide a theoretical basis for the application of a grating interferometer displacement measurement system in immersive high-end lithography scanners.