An optical encoder which is designed to convert light generated from a light source into parallel light rays by using a collimator lens, thereby allowing the collimated light to radiate to gratings (a first grating, a second grating and a third grating). A diffusing element (a diffusion plate or a diffusion surface) is provided between the light source and the collimator lens to mitigate the parallelization degree of light, thereby weakening the second-order and the third-order or high-order diffraction light. Consequently, even where a light emitting diode (LED) or laser diode (LD) is used as the light source, a favorable interference output can be obtained.