This paper deals with the design of a three-degree-of-freedom (3-DoF) parallel kinematic mechanism (PKM) with high orientational capability. First, a type synthesis method based on Grassmann line geometry and a line-graph method is proposed, and a novel 3-DoF PKM is derived based on this method. Thereafter, the parasitic motions of the derived mechanism are identified under two different orientation description methods, i.e., Tilt-and-Torsion angles (T&T angles) and Roll-Pitch-Yaw angles (RPY angles), and the kinematic optimization considering the motion/force transmissibility is carried out. On this basis, the orientational capability of the discussed mechanism is investigated, and the high orientational capability is demonstrated. The design of the 3-DoF PKM in this paper is very meaningful to the development of the five-axis machine tools with hybrid architectures. The design methods of type synthesis and kinematic optimization can also be used in the design of other PKMs.