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Dimensional variation propagation modeling is a critical enabling technique for product quality variation reduction in a multistage assembly process (MAP). However, the complex inter-stage correlations make the modeling extremely difficult. This paper aims to improve the existing techniques by developing a generic state space approach to modeling 3-D variation propagation induced by various types of variation sources in general MAPs. A concept of differential motion vector (DMV) is adopted to represent deviations with respect to four types of coordinate systems and to formulate the variation propagation as a series of homogeneous transformation among different coordinate systems. Based on this representation and formulation strategy, a novel generic mechanism is proposed to model the effect of variations induced by part fabrication processes and a MAP. A case study on 3-D variation propagation in a panel fitting process is presented to demonstrate the modeling and analysis capability of the proposed methodology.