The accuracy of spindle rotation is one of the most important precision indexes of CNC machine tools. And the spindle rotation induced error is one of the main influence factors of cutting accuracy. It will greatly affect the shape precision and surface roughness of workpiece. A new measurement method of the spindle radial rotation induced error is proposed using the cross grid encoder. The Spindle rotation induced error of machining center is analyzed in frequency domain and time-frequency domain separately to comparably study the measurement results by KGM 182 grid encoder and Double ball bar. The results indicate that the performance of the cross grid encoder test for measuring the CNC machine tool motion error is better than that of the Double ball bar, especially in the details of motion errors because of its unique characteristics. A wavelet packet algorithm is developed to analyze the singularity of signal. On machine measuring experiment has been carried out on a new Cincinnati 750 Arrow II vertical machining center. The measuring experiment result shows that the spindle radial rotation induced error of the machining center is about 0.6 μm and the cycle time is every rotation time.