The laser diffraction tool setting is a method for measuring the tool-workpiece distance by detecting the peak-point spacing of the laser diffraction fringes. Due to the existence of clamping errors of the detecting devices, the laser exhibits an oblique incidence state relative to the ideal optical axis, which will affect on the measuring accuracy of the tool-workpiece distance. In order to study the effect laws of the oblique incidence angle on the tool setting accuracy by laser diffraction, a computation model for the diffraction optical intensity and a computation model for the peak-points spacing were established. Then the laser oblique incidence angle was also given. Furthermore, a correction model of the laser inclination angle was comprehensively proposed experimentally and theoretically by measuring the peak-point position of the central diffraction fringe and the two peak points spacing of the first-order diffraction fringes. Finally, the best adjusting range of the inclination angle was confirmed based on the experimental conditions.