A new optical strain sensor is developed to rival the traditional electrical strain gauge. It directly measures in-plane strains using a high frequency grating and two position-sensitive detectors (PSDs). The strain measurement is independent of the rigid body motion of the grating. A high frequency diffraction grating attached to the surface of a specimen is illuminated by a focused or collimated laser beam. The centroids of the two symmetric diffracted beam spots from the grating are determined by the PSD sensors connected to a personal computer. The shift of diffracted beam spots due to the specimen deformation is transformed to strain components. Several measures are taken to improve strain sensitivity including residual strain error due to the misalignment of laser and grating. The measured strain is directly displayed on the monitor in both digital and graphical forms in real time. Strain sensitivity of 1 x strain and a spatial resolution of 0.1 mm can be achieved.