Railway transportation demands more efficient and accurate rail wear inspection systems to ensure the train operation safety. To obtain continuous three-dimensional data, a structured light rail wear inspection system is developed in this article, and the data processing method for aligning the point cloud from structured light scanning to the nominal computer-aided design model of the rail is investigated. For further data registration, the point cloud of the computer-aided design model is generated and the normal vectors of these points are calculated. In the coarse registration, conformal geometric algebra is applied to align the segmented point clouds by intuitive geometric calculations to those from the computer-aided design model. In the fine registration, the accurate alignment of the point clouds is implemented by the iterative closest point algorithm. The vertical and lateral wear amounts are obtained on the cross section by slicing the aligned three-dimensional point clouds data. Finally, the proposed system and method are validated by comparing the vertical wear amounts with the two-dimensional laser scanning and contact measurement results.