An optical encoder has a displacement generating unit, a light-emitting unit and an optical navigation integrated circuit. The displacement generating unit has an axle body movable along a central axial line thereof. The axle body has a free end with a diameter larger than a part of the axle body and a planar working surface formed on the free end. The light-emitting unit is configured for operatively providing a light beam to irradiate the working surface of the displacement generating unit. The light beam has a divergence angle within a range to reduce scattering. The optical navigation integrated circuit receives the reflected light beam reflected by the working surface, and calculates a relative displacement between the optical navigation integrated circuit and the working surface.