We present a probabilistic registration algorithm that robustly solves the problem of rigid-body alignment between two shapes with high accuracy, by aptly modeling measurement noise in each shape, whether isotropic or anisotropic. For point-cloud shapes, the probabilistic framework additionally enables modeling locally-linear surface regions in the vicinity of each point to further improve registration accuracy. The proposed Iterative Most-Likely Point (IMLP) algorithm is formed as a variant of the popular Iterative Closest Point (ICP) algorithm, which iterates between point-correspondence and point-registration steps. IMLP’s probabilistic framework is used to incorporate a generalized noise model into both the correspondence and the registration phases of the algorithm, hence its name as a most-likely point method rather than a closest-point method. To efficiently compute the most-likely correspondences, we devise a novel search strategy based on a principal direction (PD)-tree search. We also propose a new approach to solve the generalized total-least-squares (GTLS) sub-problem of the registration phase, wherein the point correspondences are registered under a generalized noise model. Our GTLS approach has improved accuracy, efficiency, and stability compared to prior methods presented for this problem and offers a straightforward implementation using standard least squares. We evaluate the performance of IMLP relative to a large number of prior algorithms including ICP, a robust variant on ICP, Generalized ICP (GICP), and Coherent Point Drift (CPD), as well as drawing close comparison with the prior anisotropic registration methods of GTLS-ICP and A-ICP. The performance of IMLP is shown to be superior with respect to these algorithms over a wide range of noise conditions, outliers, and misalignments using both mesh and point-cloud representations of various shapes.