Accuracy deviation will be caused if assembly tolerance clearances are unconsidered in the multi-body dynamic simulation model of a circuit breaker transmission mechanism. Based on the Hertz collision theory and LuGre tangential contact force model, the mathematic model of cylindrical hinge with the clearance is established. Then the cylindrical hinge clearance model is applied in the multi-body dynamic simulation, which the clearance is considered by Bistop function and the interaction force between pin and hole of cylindrical hinge is loaded by general force function. To verify the reasonableness of cylindrical hinge clearance model, the multi-body dynamic simulation model of a circuit breaker transmission mechanism is built. The rotate connection is built in two ways, the cylindrical hinge clearance method and the traditional revolute joint. The total stroke values which got from each simulation result are compared with test data. Finally, based on the simulation model with clearance, sensitivity analysis for the clearance values of cylindrical hinge at various positions in the mechanism is performed. The tolerance improvement is conducted at the sensitive positions. The following conclusions are obtained: (1) The cylindrical hinge clearance model can effectively improve the analytical accuracy of multi-body dynamic simulation, and the simulation results are closer to the test data. (2) The clearance method can be used to optimize the tolerances of transmission mechanism, which can improve design rationality, motion stability, and reduce the impact force of parts.