Abstract This thesis describes position-sensitive devices (PSDs) and optical sensor systems suitable for industrial tracking and displacement sensing applications. The main application areas of the proposed sensors include automatic pointing of a rangefinder beam and measuring the lateral displacement of an object. A conventional tracking sensor is composed of a laser illuminator, a misfocused quadrant detector (QD) receiver and a corner cube retroreflector (CCR) attached to the target. The angular displacement of a target from the receiver optical axis is detected by illuminating the target and determining the direction of the reflection using the QD receiver. The main contribution of the thesis is related to the modifications proposed for this conventional construction in order to make its performance sufficient for industrial applications that require a few millimetre to submillimetre accuracy. The work includes sensor optical construction modifications and the designing of new types of PSDs. The conventional QD-based sensor, although electrically very sensitive, is not considered optimal for industrial applications since its precision is severely hampered by atmospheric turbulence due to the misfocusing needed for its operation. Replacing the CCR with a sheet reflector is found to improve the precision of the conventional sensor construction in outdoor beam pointing applications, and is estimated to allow subcentimetre precision over distances of up to 100 m under most operating conditions. Submillimetre accuracy is achievable in close-range beam pointing applications using a small piece of sheet reflector, coaxial illumination and a focused QD receiver. Polarisation filtering is found to be effective in eliminating the main error contributor in close-range applications, which is low reflector background contrast, especially in cases when a sheet reflector has a specularly reflecting background. The tracking sensor construction is also proposed for measuring the aiming trajectory of a firearm in an outdoor environment. This time an order of magnitude improvement in precision is achieved by replacing the QD with a focused lateral effect photodiode (LEP). Use of this construction in cases of intermediate atmospheric turbulence allows a precision better than 1 cm to be achieved up to a distance of 300 m. A method based on averaging the positions of multiple reflectors is also proposed in order to improve the precision in turbulence-limited cases. Finally, various types of custom-designed PSDs utilising a photodetector array structure are presented for long-range displacement sensing applications. The goal was to be able to replace the noisy LEP with a low-noise PSD without compromising the low turbulence sensitivity achievable with the LEP. An order of magnitude improvement in incremental sensitivity is achievable with the proposed array PSDs.