Real-time visual simulation system for photoelectric theodolite can be used for operator training and theodolite testing. The function structure of the theodolite simulation system was established. It mainly performs theodolite scene simulation and tracking state solving. The virtual CCD camera imaging simulation, the target track simulation, the target miss-distance calculation, the background cloud simulation and the real-time graphics effects addition in the theodolite scene simulation were discussed. Simulink model of the theodolite tracking control system was established, and its code was generated with Real-time Workshop (RTW). The model code was overwritten to build the tracking state solving module. VC++, Vega, OpenGL and OpenGL Shading Language (GLSL) were adopted to develop the simulation system, and the demand of real-time was satisfied. Real theodolite system is not needed in this simulation system that the cost of training and testing decreases. Moreover, the simulation system is useful for the analysis and design of real theodolite system.