In this study, we proposed an alternative displacement sensor which constructed with reflection type holographic diffraction grating. To integrate with the truly phase detection heterodyne interferometer, and then the in-plane displacement can be measured with sub-nanometer displacement resolution. The smallest variation can be observed of proposed method is approximately 20 pm and there are no significant differences between proposed method and comparison methods. Furthermore, we evaluated the thermal property of the hologram and showed that the grating pitch variation is smaller than 0.1 nm for temperature variations within 1 °C. According to these findings, we can conclude that the holographic grating can be an alternative displacement sensor with high sensitivity and high stability.