LHCb will commence data taking as the first dedicated heavy flavour experiment at a hadron collider in 2008. A very high hit precision from its vertex detector (vertex locator, VELO) is essential to meet the tight requirements of vertex reconstruction in B-physics. The single hit precision of the VELO is better than 10μm. However, the VELO is operated only 8mm from the beam and must be retracted and reinserted each LHC fill. Hence, the detector places unique demands on its alignment algorithm. The partially assembled VELO system has already been tested in a beam test. The novel software alignment methods are presented together with their interplay with the metrology measurements. Results from Monte Carlo simulation studies are discussed and recent beam test results are shown that prove the method's precision at the micron level.