In order to obtain high-precision displacement measurement, a mathematical model for measurement deviation was constructed according to the ideal position model and signal processing methods of position sensitive detector. It indicated that the measurement deviation of system decreased with the increase of the light spot intensity, while increased with the increase of the electrical noise. A displacement measurement experiment was designed to verify the model. The experimental system included an infrared light-emitting diode and a pillow type position sensitive detector and its test circuit board. Displacement measurement experiments of 21 position points were carried out in nine different groups of spot intensities separately. The distance between every two position points each was 0.3 mm. Each group of displacement measurement data was fitted by using MATLAB CFTOOL tool, with root mean square error as a parameter evaluating the precision of position sensitive detector displacement measurement. The result shown that the precision value and its variation trends in the displacement experiment are consistent with that of model calculation.