Measurement of dynamic/transient torques is important in the dynamic analysis of rotating machinery as it provides insight into the internal state of the machine. Existing methods are difficult to implement, results are not obtained in real-time and are not very accurate. This thesis introduces a new method of determining real-time dynamic torque. An optical encoder is used to sense motion at a convenient point in the rotating system containing the rigid shaft of interest. The encoder's output is processed digitally to yield angular velocity, acceleration and dynamic torque. Two different experiments were conducted to demonstrate the advantages of this new method of determining dynamic torque over conventional methods. In one experiment, an extension spring was mounted on a crank arrangement coupled to a fractional horsepower motor to apply a periodic load to the system. A mathematical model of this dynamic system was developed to compare the results of this model with that of the instrumentation system. In another experiment, the instrumentation system was used on an existing motor-compressor system. The dynamic torque thus determined was again compared with the results of a simulation program. In both the above experiments the evaluated dynamic torque and computed dynamic torque were within 5% of each other, demonstrating accuracy and reliability of this personal computer based dynamic torque determining system. / Master of Science