In the operation of positive displacement screw machine, the profile accuracy of the screw rotor has a significant effect on the meshing stability between male rotor and female rotor, which is the main factor for vibration, noise, sealing, and wear resistance. This sets extremely strict requirements of the profile accuracy of screw rotor. Therefore, in order to obtain precise screw rotor profile, form grinding is generally used as a finishing process in the manufacture of screw rotors. Unfortunately, the grinding wheel has to be frequently dressed due to inevitable grinding wheel wear. This will cause a substantial waste of time and thus lead to inefficiency. It is therefore desirable to be able to predict the profile error caused by grinding wheel wear in order to make it controllable. In this paper, the influence of installation angle, center distance, and grinding wheel wear on rotor profile error is investigated. A novel method has been proposed for prediction profile error of the screw rotor in precision form grinding. The proposed method has been employed to compensate profile error caused by grinding wheel wear and improve grinding efficiency. Verification experiments were conducted with several screw rotors produced and profile error measured. The comparison shows that the compensation results agree well with the numerical simulation results, showing the effectiveness of the proposed compensation method.