In order to more restrict the transverse orbit error, a new method named “differenced ranges between slave stations by transfer”, similar to Very Long Baseline Interferometry (VLBI) observation, has been developed in the Chinese Area Positioning System (CAPS). This method has the number of baselines added, the baseline length increased and the data volume enlarged. In this article, the principle of “differenced ranges between slave stations by transfer” has been described in detail, with the clock offset between slave stations and system error which affects the precision of the differenced ranges observation being discussed. Using this method, the differenced observation of the SINOSAT-1 satellite with C-band between slave stations from 6 to 13 June 2005 was conducted. Then a comparison was made between the accuracy of orbit determination and orbit prediction. A conclusion can be drawn that the combination of pseudo-range receiving the own-station-disseminated signal and the differenced range observation between slave-slave stations has a higher orbit determination and prediction accuracy than using only the former.