Space-ground combined system is one of the current tendencies in the spacecraft measurement and control. The accomplishing of the Bi-satellite positioning system (BPS) can provide a possibility to realize our independent satellite space-ground measurement and control technology; also due to its advantages, such as all weather, all-time and relative high precision for orbit determination, so it can become a promising and efficient measurement and control means for LEO or MEO orbit determination. In this paper, founding on the actuality of this system and combining the demand for precise orbit determination of LEO and MEO, we advance the method of satellite orbit determination based on BPS, summarize its fundamental and composition, and present its observation model and flow for observation data, also research its mathematics model and method. This paper mainly researches and analyzes the system error characters and their parameter estimation in the process of orbit determination used by BPS. Finally, by simulation calculation and precision analysis, we research the correlation between the user satellite orbit determination precision and bi-satellite ephemeris error, data measurement precision and length of observation time, moreover, compare the ultimate precision influence caused by whether to estimate and deduct system error or not. All these work can afford theoretic basis for next project realization.