Thermal displacement is an important issue in machine tool systems. During the last several decades, thermal error compensation technology has significantly reduced thermal distortion error; this success has been attributed to the development of a precise, robust thermal error model. A major advantage of using the thermal error model is instant compensation for the control variables during the modeling process. However, successful application of thermal error modeling requires correct determination of the temperature sensor placement. In this paper, a procedure for predicting thermal-mode-based thermal error is introduced. Based on this thermal analysis, temperature sensors were positioned for multiple heat-source models. The performance of the sensors based on thermal-mode error analysis, was compared with conventional methods through simulation and experiments, for the case of a slide table in a transient state. Our results show that for predicting thermal error the proposed thermal model is more accurate than the conventional model.