A non-contacting optical sensor is devised to monitor the position and orientation of a robot end-effector or grasped object within fine limits of accuracy. This enables fine alignment of tools or parts with respect to assembly fixtures, thus rendering precision assembly tasks to be performed in a dexterous manner. The sensor is capable of detecting linear displacements of the order of 5 μm or better and angular misalignments down to 5 seconds of arc. The principle of differential detection is employed which reduces the undesired effects of noise and fluctuations in the source intensity.