In this study, a three-degrees-of-freedom laser encoder was developed. The measuring principles of linear displacement measurement was based on the diffractive method and polarization interference method. The angle measuring method was the autocollimation method. These optical paths of these two methods are designed in a single optical system. The resolution of linear displacement is 13.1 nm and the angular resolution is 0.11 arcsec.The HP laser interferometer and an autocollimator were used to verify our proposed system. The accuracy of linear displacements is 160 nm and the accuracy of angular measurement is 0.41 arcsec.