This paper is based on linear 20mum analogue signal period of open non-contact optical encoder produced by Renishaw, and adopted the circuit for the input signal pre-processing, the software in Labview, associating with the DAQ card by NI (National Instrument), to develop the technology on digital subdivision of linear. optical encoder for nanopositioning within a relatively large-scale. This paper introduces the principle of the subdivision and the related technique on signal processing. The principle of subdivision is improved amplitude subdivision technique, which would reduce the errors of traditional amplitude subdivision technique when approximate method is used. Besides, in the way of counting the zeros of the output sinusoidal waves and cosine waves, the circuit could be simplified and the accumulated errors caused by the circuit could thus be reduced. The HP5529A laser interferometer is used to calibrate the effect of the subdivision within both large-scale and short-scale. In this paper, the subdivision error could be limited in 0.15 mum in large-scale while in short-scale it can be reduced to 20 nm and the resolution is 1.22 nm. Nanopositioning can be realizable when this subdivision technique is applied.