A two degree-of-freedom (DOF) micro motion sensing system to assess micromanipulation accuracy and physiological tremor has been developed. The system employs a position sensitive detector (PSD) module and a laser diode placed inside an instrument used in micromanipulation. A laser light is shined from the laser diode onto the PSD surface which is faced upward. The PSD detects the centroid position of the laser light spot falling onto its surface. A few markers are overlaid in a circular pattern on the PSD surface as reference for path dependent tests. Ambient light disturbance is eliminated by modulating the laser light on and off. Advantages and limitation of the system comparing to other similar systems are described.