This paper presents a satellite relative navigation strategy for formation flying, which chooses an appropriate navigation algorithm according to the operating environment. Not only global positioning system (GPS) measurements, but laser measurements can also be utilized to determine the relative positions of satellites. Laser data is used solely or together with GPS measurements. Numerical simulations were conducted to compare the relative navigation algorithm using only laser data and laser data combined with GPS data. If an accurate direction of laser pointing is estimated, the relative position of satellites can be determined using only laser measurements. If not, the combined algorithm has better performance, and is irrelevant to the precision of the relative angle data between two satellites in spherical coordinates. Within 10 km relative distance between satellites, relative navigation using double difference GPS data makes more precise relative position estimation results. If the simulation results are applied to the relative navigation strategy, the proper algorithm can be chosen, and the relative position of satellites can be estimated precisely in changing mission environments.