The implementation of an incremental optical encoder for measurement of gimbal pointing angles is discussed. The application described is typical of many programs being conducted at SVS Systems, Inc. Performance requirements such as resolution, accuracy, bandwidth, size, and weight are described and the advantages of using the optical encoder instead of more 'traditional' technologies are given. The resolution of the optical encoders is on the order of 20 nanoradians. Disadvantages to using the optical incremental encoders are discussed as implementation challenges. An overview of how these challenges were overcome is described. A control system implementation using the encoders for gimbal stabilization is presented, including simulations result. The combination of resolution, repeatability, and accuracy of the encoders opens new possibilities for gimbal stabilization without rate sensors attached to the pointing mirror, as shown through simulation. Test results verifying the proper operation of the encoder are presented.