We report a novel surface-micromachined micro-optical bench (MOB) technology which enables us to monolithically integrate 'flipped-up' free-space optical elements with micro-positioners and micro- actuators. This technology allows complete optical systems be implemented on a single Si chip using IC-like microfabrication processes. We have, for the first time, successfully fabricated micro-Fresnel lenses, mirrors, beam-splitters, gratings, and precision optical mounts, as well as rotational stages and other micro- positioners. Self-aligned hybrid integration with edge-emitting lasers and vertical cavity surface-emitting lasers (VCSEL) are also demonstrated for the first time. The MOB technology could significantly reduce the size, weight, and cost of most optical systems, and has a significant impact on optical switching, optical data storage, optoelectronic packaging.