Travel time estimation for freeways has attracted much attention from researchers and traffic management departments. Because of various uncertain factors, travel time on a freeway is stochastic. To obtain travel time estimates for a freeway accurately, this paper proposes two traffic sensor location models that consider minimizing the error of travel time estimation and maximizing the collected traffic flow. First, a dynamic optimal location model of the mobile sensor is proposed under the assumption that there are no traffic sensors on a freeway. Next, a dynamic optimal combinatorial model of adding mobile sensors taking account of fixed sensors on a freeway is presented. It should be pointed out that the technology of data fusion will be adopted to tackle the collected data from multiple sensors in the second optimization model. Then, a simulated annealing algorithm is established to find the solutions of the proposed two optimization models. Numerical examples demonstrate that dynamic optimization of mobile sensor locations for the estimation of travel times on a freeway is more accurate than the conventional location model.