A two-dimensional device of gap detection in tool-setting is designed, which is applied to a small lathe. A way of orthogonal layout is used to construct an optical measurement system, and a gap detection system of tool-setting is established based on image processing. The optical system is calibrated precisely by using standard gauge blocks and applied to measure the micro gap of tool setting. The inspection system is installed on the small lathe developed independently. The system verification is done through motion stage of lathe applying micro displacement. The results show that: the detection algorithm can recognize and detect the gap of tool-setting in small lathe fast and effectively. Moreover, the detection precision can reach 15 μm. The correctness of detection algorithm for small lathe is verified experimentally for high-precision tool setting of small lathe.