We develop a high-precision model for relativistic observables of the Atomic Clock Ensemble in Space (ACES) experiment on the International Space Station (ISS). We develop all relativistic coordinate transformations that are needed to describe the motion of ACES in Earth orbit and to compute observable quantities. We analyze the accuracy of the required model as it applies to the proper-to-coordinate time transformations, light time equation, and spacecraft equations of motion. We consider various sources of nongravitational noise and their effects on ACES. We estimate the accuracy of orbit reconstruction that is needed to satisfy the ACES science objectives. Based on our analysis, we derive models for the relativistic observables of ACES, which also account for the contribution of atmospheric drag on the clock rate. We include the Earth's oblateness coefficient $J_2$ and the effects of major nongravitational forces on the orbit of the ISS. We demonstrate that the ACES reference frame is pseudo-inertial at the level of accuracy required by the experiment. We construct a Doppler-canceled science observable representing the gravitational redshift. We derive accuracy requirements for ISS navigation. The improved model is accurate up to $<1$ ps and $\sim 4\times 10^{-17}$ for time and frequency transfers, correspondingly. These limits are determined by the higher order harmonics in Earth's gravitational potential.