A rapid and inexpensive approach is proposed for identifying the existence of geometric and kinematic errors in a Coordinate Measuring Machine (CMM) by means of a circular profile measurement. The proposed approach is applied to an existing CMM where test results are compared to simulation results and errors are identified. Further, a method to improve the CMM performance by error compensation is explained. This method consists of the general and systematic kinematic and geometric error modelling of a CMM for a reference temperature, in addition to the development of a compensation strategy to correct these errors. To verify the rapid error identification approach proposed above and to calculate the error model coefficients for the CMM under investigation, individual errors of the CMM are measured by laser interferometry. The resulting error model is employed directly in the compensation for the CMM errors. Performance improvement of this CMM is presented through measurement of its work tolerance before and after compensation, in accordance with the ASME standards for CMM performance evaluation.