This paper presents the fundamental characteristics of bistatic altimetry performed using the Global Positioning System (GPS) signal scattered off the ocean surface and collected by a receiver in space. The advantage of the dense and rapid surface coverage afforded by the existing GPS constellation would enable new oceanographic applications such as eddy monitoring and the tracking of fast barotropic waves. To exploit the wealth of potentially available measurements, the paper provides a first cut at a system required to perform such measurements from space. In particular, the choice of pointing direction for the receiving antenna is discussed together with the implications in terms of instrument footprint and coherence time. The theoretical reflected signal is then derived by extension of the cross-correlation process used for direct GPS signals, and the characteristics of the leading edge are emphasized, to identify analogies and differences with the traditional altimetry waveform. In particular, the derivative of the leading edge is examined to assess the sensitivity to mean sea height, wind speed, and significant wave height. An overall range accuracy rms value is predicted for several antenna gains, pointing directions, and different geometric scenarios. When averaging many measurements, the range error is progressively reduced yielding predicted accuracies in sea height with associated spatial and temporal resolutions. The effect of wind speed and significant wave height on the received signal is discussed by performing simulations with a realistic range of these variables. The range accuracy versus receiving antenna gain and scattering direction is discussed, and a specific guideline on the gain necessary for altimetry from space is provided.