This paper, presents a novel low-cost, compact, rugged, optical rotational sensor. The optical sensor is based on optical navigation technology, which measures changes in position by optically acquiring sequential surface images (frames) through a CCD array and mathematically determining direction and magnitude of angular displacement. Further the efficiency of the system was tested by placing the sensor 2mm above a circular disc; it was moved through a known angle. A stepper motor and a rotary stage were chosen as the references for providing the rotary motion. It was found that sensing larger radii which corresponds to a higher resolution, the scale factor of the displacement vector increased proportionally, thereby demonstrating good linearity. It was also observed that slower sensitivity (rotation rate) had a higher accuracy pointing to a trade off between frame rate and accuracy of measurement. The sensor has a resolution of 0.12° and a best accuracy of 99%.The sensor would find applications in Inertial Navigation systems and autonomous robots. © 2017 SPIE.