Grinding is a processing method that involves duplicating shape accuracy, so the shape accuracy of the grinding wheel plays a crucial role in machining accuracy. However, this accuracy is difficult to obtain. This paper describes an on-machine wheel profile measuring method that uses a non-contact displacement sensor to obtain the shape accuracy of an arc grinding wheel in a 3-axis aspheric surface grinding machine. This method involves data processing with object radius confined filtering, as well as evaluation using the methods of fitting residual error, measurement uncertainty, and machining result simulation. To verify the feasibility of this measuring method, experiments were performed using two diamond grinding wheels (FEPA D91 with grit size 75-90 μm, and FEPA D15 with grit size 10-25 μm). The experimental results indicate that the method is accurate enough to give the arc grinding wheel profile measurement, while the measuring uncertainty is of the same order of magnitude as the grit size (that is, tens of μm). Moreover, the simulation of the grinding effect with wheel profile measurement data can derive the relationship between the wheel profile error and the machining form error, and can be used to instruct the truing time determination for precision grinding.