The effect of shaft misalignment on the accuracy of four types of precision digital shaft angle encoders (219 resolution elements per rotation) was determined using a special test fixture and optical techniques. The encoders and couplings were precisely aligned or misaligned by known amounts. When properly aligned to the shaft whose rotation is to be measured, the encoders exhibit rms errors of less than a single resolution element even when connected through a coupler. When the axes of shaft and encoder transducer are mutually misaligned, the different systems vary as to the amount of corresponding error introduced into the encoder output. In each case, the errors varied in a sinusoidal manner with respect to shaft angle. By the optical method alone, it was not possible to distinguish between errors caused by the associated coupler and those inherent in the encoding transducer itself. A second method of evaluation, utilized a computer to analyze the sum of two identical encoders connected so that one of them turned in a positive direction while the other turned in a negative direction (back-to-back). The large number of measurements per revolution allowed us mathematically to separate out errors due to various causes. The system evaluated by this method showed that the greatest fraction of the errors may be attributed to distortions in the coupler, amounting to the equivalent of several resolution elements. When properly aligned, all systems exhibit excellent accuracy.