Great length, large weight and other factors may cause difficulty in measuring the profile accuracy of the double-headed screw rotor. To solve this problem, an on-machine measuring system based on a laser-displacement sensor (LDS) was designed and implemented in this paper by taking an LXK100 four-axis whirlwind milling machine as the carrier. To improve the measurement accuracy of the system, the generalized variable-structural-element morphological method, polynomial interpolation algorithm and ellipse fitting method were first combined to realize the rapid subpixel centroid extraction from a noise-containing spot image, thus improving the data acquisition accuracy of the LDS, and then the hybrid method was experimentally verified. Next, a wavelet threshold function with high-order differentiability and adaptive wavelet coefficient contractility was constructed based on the hyperbolic tangent function, so as to inhibit the disturbance from random errors and preserve real profile information, and this method was simulated and verified. Subsequently, a smoothing algorithm for point cloud data was proposed based on the Lagrange multiplier method to avoid the defect of the piecewise curve-fitting method, that is, function continuity and differentiability could not be satisfied at piecewise points. Finally, the profile accuracy was calculated in real time according to the data reconstruction result and the machining quality was judged. The measurement experiment of the double-headed screw rotor indicates that the proposed on-machine measuring system can complete the profile accuracy measurement for a screw pitch within 39.7 s with measurement accuracy reaching ±8 μm, and the measurement uncertainties of the major axis, minor axis and screw pitch are 0.72 μm, 0.69 μm and 1.24 μm, respectively. Therefore, the measurement accuracy and efficiency are both remarkably improved.