More accurate tree models, such as branch skeleton, are needed to acquire forest inventory data. Currently available algorithms for constructing a branch skeleton from a LiDAR point cloud have low accuracy with problems such as irrational connection near trunk bifurcation, excessive central deviation and topological errors. Using the C++ and PCL library, a novel algorithm of the incomplete simulation of tree transmitting water and nutrients (ISTTWN), based on geometric characteristics for tree branch skeleton extraction, was developed in this research. The algorithm is an incomplete simulation of tree transmitting water and nutrients. Improvements were made to improve the time and memory consumption. The result show that the ISTTWN algorithm without any improvements is quite time consuming but has consecutive output. After improvement with iteration, the process is faster and has more detailed output. Breakpoint connection is added to recover continuity. The ISTTWN algorithm with improvements can produce a more accurate skeleton and cost less time than a previous algorithm. The superiority and effectiveness of the method are demonstrated, which provides a reference for the subsequent study of tree modeling and a prospect of application in other fields, such as virtual reality, computer games and movie scenes.