A terrain mapping system is disclosed for a machine having at least one traction device. The system may have a sensor associated with the machine and configured to generate a signal indicative of a position of the machine. The system may also have at least one controller in communication with the sensor. The at least one controller may be configured to receive the signal from the sensor, and divide an area between the at least one traction device and a work surface into a plurality of virtual tracking features based on the signal and known geometry of the machine. The at least one controller may also be configured to track movement of the plurality of virtual tracking features, and update an electronic terrain map of a worksite based on the movement of the plurality of virtual tracking features.