The integrated chip of optical micro-encoder was fabricated and the feasibility as displacement measurement device was confirmed. The geometry of micro-encoder was designed to utilize the optical interference effect on the second order of diffracted beams. The hybrid-type micro-encoder consisted with light emitting diode, photodiode, polyimide wave-guide and micro-lens provides stable micro-encoding results for high speed displacements. The measurement shows the resolution of displacement of 1.00 +/- 0.02 ${mu}m$ for the grating with scale pitch of 2.0${mu}m$.