Precision length measurement is one of the key techniques of modern manufacturing and industrial mechanics. Taking advantage of the high sensitivity and the corresponding relation between oscillation frequencies and group delay of the loop, the novel length measurement method based on Opto-Electronic Oscillator promises high accuracy absolute length measurement at long range. The length of optical fiber, which affects the characteristic of measurement and signal spectrum, is the key variable parameter, and has a great influence on the length measurement error. In this paper, the most important fiber-length-dependent errors, including the thermally-induced error and the error induced by frequency measurement error, are theoretically analyzed based on the principle of OEO. The fiber-length-dependent error model is established. And the optimum fiber length is deduced according to the model, and practical optimal design way of fiber length is proposed to reduce length measurement error. Experiments on different length of fiber are carried out to verify the optimization of this length measurement method. The results are insistent with the theory, showing the optimization method is effective and practical to reduce the fiber-length-dependent error.