Large position tracking errors and vibrations are commonly seen in robot machining due to the robot’s joint compliance. This paper proposes a dual-loop compensation control method to address this issue for robots with both motor and link side encoders. By taking advantage of link side encoders, the natural frequency and damping ratio of original robot dynamics are reshaped by a velocity compensation controller design to suppress vibrations. Meanwhile, link side position tracking error and velocity are employed to compute position compensation value to further improve robot machining accuracy. The effectiveness of this method was verified through single-joint simulation experiments. With large and noisy torques acting on the joint during robot machining, the simulated results showed that compared to full closed-loop P-PI control and ordinary damping control, the proposed method can significantly reduce the maximum position tracking error by up to 88.96% and 66.28% respectively with a shorter settling time.