An optical encoder based on the Lau effect is presented. It is shown that this system has several advantages over standard optical encoders based on the moire´ effect, such as smaller sensitivity to variations in the gap between gratings and higher design simplicity. Problems due to the quality of the collimated beam, which are present in moire´-effect-based encoders, are also avoided. Two different optimized designs for different resolutions are presented. Experimental measurements, in good agreement with the model developed by us, are presented. © 2000 Society of Photo-Optical Instrumentation Engineers.