This paper presents a novel multiple-input-multiple-output (MIMO) channel sounding technique with a fully parallel transceiver architecture that employs a layered scheme of frequency and space-time division multiplexing. It offers inherent scalability of the number of antennas by a combination of multiple transceiver units and flexibility for both directional MIMO channel and multi-link MIMO channel measurements. This paper describes the principle of the channel sounding technique and formulates the signal processing that makes possible various scalable unit configurations. The influence of the transceiver imperfections such as I/Q imbalance (IQI) and phase noise (PN) on the measurement accuracy is discussed, and a multitone allocation scheme that is robust against IQI is also introduced. Using computer simulations, the measurement accuracy in the presence of IQI and PN is evaluated using the normalized mean square error, which provides a design guideline for the realization of hardware.