The design of minitype theodolite’s vertical shaft which based on angular contact ball bearings usually refer to similar model for estimation and analogy. This method can effectively improve the design efficiency as well as endowing the vertical shaft a better engineering practicability. However, these experience-based designs hardly reach the best options, hence leaves room for optimizing and improvements. The vertical shaft of a small theodolite was studied from tilt error correction. The shaft optimization parameters were determined based on the physical model. Then the design parameters of bearing outer end ring were optimized by using finite element analysis. At the same time, the selection of bearing fit clearance’s design parameter values were analyzed through tilt error theoretical modeling. Meanwhile, the biaxial perpendicularity errors of this small theodolite with and without optimizing were both detected after partial load hoisting. The result shows that the biaxial perpendicularity error of optimized theodolite is lower with an approximate value of 6", compared unoptimized theodolite with an approximate value of 20". Tilt error of the rear vertical shaft is less than that before optimizing. The rationality and effectiveness of this optimization method mentioned are verified.