This study put forward a novel high precision digital angular displacement sensor. The mechanical structure design of the sensor was completed. The working principle of angular displacement sensor was analyzed in detail. The hardware and software design of the interface circuit of the sensor was completed and the performance of the sensor was analyzed. Compared with the traditional angular displacement sensors, the angular displacement sensor proposed in this paper has features of high precision, efficiency, explicit structure, better maintainability, low cost, wide measuring range, direction-judgement, no need to adjust zero and it has general application value in industry field.