An in-situ end-point detection technique for ion-beam etching is presented. A laser beam of the same wavelength and polarization as those in the intended application of the grating is fed into the vacuum chamber, and the beam retro-diffracted by the grating under etching is extracted and detected outside the chamber. This arrangement greatly simplifies the end-point detection. Modeling the grating diffraction with a rigorous diffraction grating computer program, we can satisfactorily simulate the evolution of the diffraction intensity during the etching process and consequently, we can accurately predict the end-point. Employing the proposed technique, we have reproducibly fabricated multilayer dielectric gratings with diffraction efficiencies of more than 92%.