To improve the reliability and accuracy of photoelectric angular displacement measuring device and enable proper decoding in the case of contamination, this paper investigates contamination detection and real-time correction methods for contamination-induced error codes in image-based angular displacement measurements. First, the principles of angular displacement measurement and the effects of contamination on this measurement are presented. Then, to detect the code disk contamination and correct the resulting error codes in real-time, the detection-correction-conjecture and area pixel scanning methods are proposed for the rough and precision code areas, respectively, in the course of correction, a new precise coding method is designed. Finally, the proposed contamination detection and real-time error code correction methods are experimentally validated. Results show that the proposed method can detect contamination and correct the resulting error codes in real time. This research is important for improving the reliability and accuracy of angular displacement measurements.