To realize a fast and high-precision angular measurement method, this study focused on the signal processing algorithm of a single-track absolute encoder, which can be easily applied to photoelectrical theodolites. Using this algorithm, the grating line center and pulse width could be quickly estimated with only two sampling points of the rising and falling edges, by setting a threshold for the observed grating data. To improve the existing subdivision method, a high-resolution subdivision algorithm for angular measurement was provided by calculating multiple grating line centers. We also analyzed the algorithm's time complexity and anti-noise ability by simulation. Experiments were performed to evaluate the measurement precision, output stability, and running speed. The results showed that the standard deviation of error was within 2.5 seconds, and the rate of angular output was 25 times per second. This algorithm is easy to implement and has merits of both limited computation and high-precision. Thus, a new angular measurement signal-processing algorithm, which can be applied to a single-track absolute encoder for a photoelectrical theodolite or total station instrument in the future, can be developed with the results of this research.