In CNC machine tools, transient temperature variation in the headstock assembly is the major contributors for spindle thermal error. The compensation of thermal error is critical for ensuring the accuracy of machine tool. The performance of an error compensation system depends largely on the accuracy and robustness of the thermal error model. In the present work, a robust thermal error model is developed for minimizing the error in lateral direction of the spindle which significantly influences the geometrical accuracy of the workpiece. Analysis-of-variance (ANOVA) is applied to the results of the experiments in determining the percentage contribution of each individual temperature key point against a stated level of confidence. Based on the analysis of existing approaches for thermal error modeling of machine tools, an approach of LASSO (least absolute shrinkage and selection operator) is proposed in order to avoid the multi collinearity problem. The proposed method is an innovative variable selection method to remove redundant or unimportant temperature key points in the linear thermal error model and minimize the residual sum of squares. The predictive error model is found to have better robustness and accuracy in comparison to the combination of grey correlation and step wise linear regression for error compensation of CNC lathe. Keywords: Analysis Of Variance (ANOVA), CNC Machine Tool, Grey Correlation Analysis (GCA), Headstock Assembly, LASSO Regression, Mean Absolute Deviation (MAD), Mean Square Error (MSE), Robustness, Standard Deviation (SD), Thermal Error.