The effect of the collimation degree of light beam of a Light Emittering Diode(LED) on the performance of optical encoders was researched.By analyzing on the impact of radiation angles of a light source on the grating flux,and by applying of a rotation matrix method and frequency-domain analysis, the light distribution function formula of Moiré patterns was deduced and its simulation waveforms with various slit widths were presented.Furthermore,the influences of collimated light source on the contrast ratio of Moiré patterns and the grating gaps were analyzed.The Experimental results indicate that the contrast ratio of Moiré patterns is reduced by 17.66% when the value of slit width is reduced by 5 μm,and obtained results is well coincident with the simulation waveforms.Therefore,the proposed Moiré pattern formula relative to the collimation degree is very helpful to the design and production of high quality encoders.