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A low-cost interferometer for piezoelectric actuator (PEA) displacement and velocity feedback was developed and described here. An initial design employed a single photodiode as a sensing element. Although fringes could be measured successfully, to obtain the direction of displacement, the PEA control input was needed. A low-cost interferometric encoder is developed that employs a pair of silicon photodiodes and a manual micropositioner stage. With this system, the actuator input is not needed for direction determination, while a 158.2 nm resolution is achieved. Algorithms for the single photodiode and for the interferometric encoder were developed and are described in detail. The results were verified using a PEA-embedded strain gage. The developed device can be used for PEA characterization and for real-time position and velocity control of micromechanisms and microrobots.