A powerful new optical method that utilizes diffractive optic interferometry (DOI) to measure both in-plane and out-of-plane displacement with variable sensitivity using the same optical system is introduced. Sensitivity is varied utilizing various combinations of the different wavefronts produced by a conjugate pair of binary optical elements; a transmission grating is used to produce several illumination beams, while a reflective grating, replicated on the surface of a specimen, provides the reference for the undeformed state. A derivation of the equations that govern the method is included along with a discussion of the experimental tests conducted to verify the theory. Overall, the results are excellent, with experimental data agreeing to within a few percent of the theoretical predictions.