In multistage manufacturing systems, quality of final products is strongly affected not only by product design characteristics but also by key process design characteristics. However, historically, tolerance research has primarily focused on allocating tolerances based on product design characteristics for each component. Currently, there is no analytical approach for multistage manufacturing processes to optimally allocate tolerances to integrate product and process characteristics at minimum cost. One of the major obstacles is that the relationship between tolerances of process and product characteristics is not well understood and modeled. Under this motivation, this paper aims at presenting a framework addressing the process-oriented (rather than product-oriented) tolerancing technique for multistage manufacturing processes. Based on a developed state space model, tolerances of process design characteristics at each fabrication stage are related to the quality of final product. All key elements in the framework are described and then derived for a multistage assembly process. An industrial case study is used to illustrate the proposed approach.