To improve and maintain the machining accuracy of machine tools, this paper proposed a novel compensation method based on adaptive segmentation modeling and dynamic modification. This algorithm can figure out the exact segmentation intervals and the best-fitting polynomial automatically according to the positioning error curve shape and the modeling accuracy requirement. In addition, the compensation model is not a fixed algorithm. It can monitor the real-time temperature field of machine tools, the ambient temperature variation, as well as the working conditions of coolant, and adjust the coefficients for the compensation model. Compensation experiments on the machining center VM850 showed that the compensation method could meet the requirement of realtime error compensation under complex working conditions, with its excellent modeling accuracy and robustness.