A novel three degrees of freedom sensing method utilizing binary grid pattern image and vision camera is presented. The binary grid pattern image is designed by Pseudo-Random Binary Arrays and referenced to encode in-plane position of a moving stage of the contact-free planar actuator. First, the yaw motion of the stage is detected using fast image processing and then the other planar positions, x and y, are decoded with a sequence of images. This method can be applied to the system that needs feedback of in-plane position, with advantages of a good accuracy and high resolution comparable with the encoder, a relatively compact structure, no friction, and a low cost. In this paper, all the procedures of the above sensing mechanism are described in detail, including simulation and experiment results.