A relative-story displacement sensor for measuring the ceiling-floor displacement and the floor inclination angle was developed. Three pairs of position-sensitive detector (PSD) units and light emitting diode (LED) arrays were utilized for the measurement. The measurement accuracy of the sensor was evaluated using a shaking table and a θ-stage. The outputs from the developed sensor agreed well with the reference, and the accuracy was evaluated to be approximately 0.15 mm in the displacement and 0.1 mrad in the local inclination angle. These results indicate that the developed sensor resolves the angular error problem on the relative-story displacement measurement and is applicable for assessing the safety of actual buildings.