Abstract: Aiming at solving problem of existing grating ruler measurement method with which high speed and high precision can not be taken into account, measurement principle of transformation from horizontal to vertical scale of incremental grating and corresponding image processing algorithms are proposed in order to meet the requirement of feedback displacement for high speed motion and high precision positioning of electronic manufacturing equipment. In order to improve speed of grating image acquisition and processing, a hardware testing platform based on FPGA is built. Firstly, images collected by FPGA system are filtered and binarized, then processed images are added with vertical coordinates and horizontal coordinates accordingly. In this way point displacement value is obtained by calculating smallest pixels. Experimental results show resolution of 0.029 μm and precision of 0.3 μm can be achieved by using FPGA testing system with vertical and horizontal conversion algorithms.