Laminated object manufacturing (LOM) is one of the commercialized rapid prototyping (RP) processes, where a focused laser is usually used to cut the cross-section contours of a 3 D part and the grid hatchings of the part-exterior region on a sheet paper stack-wise. Using a laser beam as a cutter can be costly, and the thermal burning of a sheet paper along a laser scanning path can also cause an environment-polluting smoke. This paper presents a paper laminating RP system using a knife as the paper cutter instead of a laser beam. The knife holder is mounted through a radial bearing on the X-Y positioning mechanism in such a way that the knife tip is eccentric to the bearing axis by a small distance (so-called offset). Therefore, the knife tip, which engages into the sheet paper during cutting, tends to follow the path of the XY-driven bearing axis by the error that depends on the path tangential and the eccentricity of the knife tip. A tractrix model is applied to describe the kinetic motion of the knife tip and a method is formulated to compensate for the tracing error of the eccentric knife tip by modifying the original cross-section contours of the part for each layer based on the tractrix equation. A study has also been performed regarding the effect of the knife tip geometry on the cutting notch of the sheet paper and on the roughness of the finished part.