Considering automatic and effective stereo image matching for vehicle-borne mobile mapping system (VMMS), a new stereo image matching algorithm based on digital parallax model (DPM) is proposed in this paper. The new matching propagation strategy is designed in this algorithm, which includes two processes as DPM construction and parallax prediction. With some known matched points, the DPM of stereo image pairs is firstly constructed, and parameters for confirming conjugate epipolar line is also worked out. Then searching range during dense matching can be confirmed under constraints of DPM and epipolar line, which can improve matching speed and accuracy. Furthermore, to improve matching robustness, the computation model of similarity measurement combined with local structure feature and global color feature is designed. The new algorithm is applied to actual stereo images taken by VMMS to verify its validity. Experimental results show that the proposed approach has higher reliability and accuracy.