This study presents a novel fast Fourier transform (FFT)‐based non‐contact vibrational harmonics measurement system using a position sensitive detector (PSD) along with calibration using a piezoelectric accelerometer. Frequency‐domain vibrational analysis is required as the changes in machine dynamics are directly related to its failures and could provide more insight into the vibration signal. In this regard, FFT is used for spectral analysis to detect the harmonics in the vibration signal. The novelty of the applied technique for detecting vibrational harmonics lies in its innate contactless nature where the vibration detection sensor i.e. PSD is placed at a particular distance from the vibrating target. Additionally, the parasitic and external vibrations, which might pose unforeseen errors in the detected vibration data, have been nullified by employing a self‐vibration technique using an ADXL‐345 three‐axis accelerometer. The results obtained through PSD have been calibrated via a standard Brüel & Kjaer (B & K) vibration measurement system which uses a piezoelectric accelerometer (B & K accelerometer). The proposed measurement technique is equipped with NI compact RIO‐9074 that features a real‐time processor and an FPGA. The system was observed to effectively measure the frequency range 5–600 Hz with a maximum relative error of 2% in FFT amplitudes.