The ultra-precision grid encoder is the key technology of the immersion lithography scanner for 32-7 nm node. Firstly, by analyzing the requirements and layout of the grid encoder position measurement system of the immersion lithography scanner, the basic requirement of a special grid encoder for the scanner is proposed. Secondly, for the present grating encoder, research on the basic optical path, phase detection, resolution multiplication, off-axis/rotation tolerance, and dead-path restrain scheme is reviewed and analyzed. Then, the key problems of the present scheme in the application of the lithography scanner are proposed. Thirdly, to address the required nanometer accuracy for the instrumental error of the grid encoder, the research on nonlinearity, dead-path, thermal drift, and wave-front distortion error are reviewed and analyzed; and the key problems to achieve sub-nanometer accuracy for the grid encoder are proposed. Finally, the above review is summarized, which can serve as a reference for the special grid encoder of immersion lithography scanner.