An auto-focusing and auto-alignment system based on digital image processing and the computer control technology was developed for 3-LCD projector manufacture. We analyzed the imaging characteristic of the optical system, and developed a mathematical model to realize the accurate focusing of each LCD panel and accurate alignment among three LCD panels. Based on the model, the experimental facility was set up, which is compose of five CCD detectors that are placed on the screen at different filed of view to capture images and regulating mechanism of LCD’s six-dimensional degree of freedom droved by stepper motors. Appropriate defocusing evaluation function and alignment algorithm were also presented in this paper. The images captured by CCDs are processed to get the defocusing amount of every panel by the variance function and displacement amount of the three LCD panels by the gravity model approach. Then commands are sent to regulating mechanism to control the movement of each panel. After several turns of auto-correction, all the panels are in the proper position. Experiment results show that with the proper algorithm, the system can provide high accuracy and good performance in projector manufacture. The whole focusing and alignment process can be finished within ten minutes which is far superior to that made by man more than half an hour. With this system, completely automatic product lines can be established, which can provide 3-panel LCD projector light engines with considerable focusing and alignment accuracy.