A precision displacement measurement system of 3-DOF micro motions is proposed in this paper. The measurement system is composed of two diode lasers, two quadratic PSDs, two beam splitters and a sphere whose surface is highly reflective. In this measurement system, the sphere reflector is mounted on the platform of positioning devices whose 3-DOF translational motions are to be measured, and the sensitive areas of two PSDs are oriented toward the center point of the sphere reflector. Each laser beam emitted from two diode laser sources is reflected at the surface of sphere and arrives at two PSDs. Each PSD serves as a 2-dimensional sensor, providing the information on the 3-dimensional position of the sphere. In this paper, we model the relationship between the outputs of two PSDs and 3-DOF translational motions of the sphere mounted on the object. Based on a deduced measurement model, we perform measurement simulation and evaluate the performance of the proposed measurement system: linearity, sensitivity, and measurement error. The simulation results show that the proposed measurement system can be valid means of precision displacement measurement of 3-dimensional micro motions.