We describe a new precision displacement probe-the precision holographic optical probe (PHOP)-with the use of double holographic optical element (DHOE) technology. It is a novel noncontact method for the measurement and inspection of displacement and surface quality control. To improve the measurement resolution and linearity, the differential method for the PHOP is introduced. Infrared DHOEs are made by using a computer-generated hologram method. Mathematical models have been developed to analyze the performance of the probes. Computer simulations and experimental results have been obtained, showing sensitivity on the order of nanometers for these probes. The complexity and the size of the probes can be significantly reduced. They are both compact and inexpensive.