In this study, a laser linear encoder with three degrees of freedom (3-DOFs) based on diffraction and interference was developed to measure the linear displacement and two angular errors of a linear moving stage. Parts of the linear motion errors induced from the two angular errors can be calculated by this prototype 3-DOF laser encoder. It was an effective method for online error calculation and compensation to improve precision stage performance. This new function was superior to other laser encoders. The verification results showed that the resolution is 20 nm. It detected displacements relative to an external grating scale with accuracy of about ±150 nm for a measuring range of ±1 mm, and detected the angular errors with related accuracy of about ±1 arc sec for a measuring range of ±100 arc sec.
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