Rotary and linear position sensors are used in numerous manufacturing and automotive applications, where cost effectiveness and the ability of integration are major goals. To meet the increasing demand for competitive optical rotary encoders, in recent years a novel type of optical encoders have been proposed and demonstrated using a micro grating based encoding scheme. This proceeding will give details on the operation principle of this novel kind of position encoder and will show its performance on two exemplary implementations: A compact absolute rotary encoder with a micro-structured plastic disc, which can be manufactured in a conventional and cost effective DVD-molding process and a linear encoder which is based on a pseudo-random coding scheme. The implementation as well as results from their experimental characterization are presented.© (2011) COPYRIGHT Society of Photo-Optical Instrumentation Engineers (SPIE). Downloading of the abstract is permitted for personal use only.