With the increasing congestion in orbital environments, on-orbit observation has become critical for spacecraft safety. This study investigated the observation performance of space-based inverse synthetic aperture lidar (ISAL) for monitoring on-orbit targets and space debris in geostationary Earth orbit (GEO) and low Earth orbit (LEO). Using STK simulations, the performances under fly-around and fly-by scenarios were evaluated based on three key parameters: minimum imaging time, pulse repetition frequency (PRF), and signal-to-noise ratio (SNR). The results reveal that while the GEO provided a high PRF and SNR for fly-around observations, longer imaging times limited its practical application, making the fly-by mode more suitable. In contrast, the LEO provided stable fly-around observations with lower system requirements, but the fly-by mode suffered from high PRF demands and a low SNR due to the high relative angular velocity of the target. This study further simulated fly-by observations for actual space debris in both the GEO and LEO, validating ISAL’s performance under different conditions. These findings offer valuable insights into the selection of observation modes and the optimization of ISAL’s performance in on-orbit target and debris monitoring, serving as a foundation for future space-based monitoring systems.