One of the traditional optical methods to monitor a tool is a CCD sensor-based vision system which captures an aspect of the tool in real time. In the case using the CCD sensor, specific lens-modules are necessary to monitor the tool with higher resolution than its pixel size, and a microprocessor is required to attain desired data from captured images. Thus theses additional devices make the entire measurement system complex. Another method is to use a pair of an optical source and a detector per measuring axis. Since the method is based on the intensity modulation, the structure of the measurement system is simper than the CCD sensor-based vision system. However, in the case measuring the three dimensional position of the tool, it is difficult to apply to micro machine-tools because there may not be space to integrate three pairs of an optical source and a detector. In this paper, in order to develop a tool-origin measurement system which is employed in micro machine-tools, the improved method to measure a tool origin in x, y and z axes is introduced. The method is based on the intensity modulation and employs one pair of an optical source radiating divergent beams and a quadrant photodiode to detect a three dimensional position of the tool. This paper presents the measurement models of the proposed tool-origin sensor. The models were verified experimentally The verification results show that the proposed method is possible and the induced models are available for design.