Abstract: A modular incremental rotary shaft encoder is preassembled within its housing and then installed and aligned upon the shaft of which rotation is to be sensed. The encoder housing loosely confines a thin disc assembly having a shaft receiving aperture dimensioned to be a press fit upon the shaft. The encoder is installed simply by pressing the housing and the disc assembly therein upon the shaft and fixing the housing to the shaft support. The disc assembly plane of rotation and the disc to detector gap are fixed by inserting a slender elongated installation tool through the housing cover into engagement with the disc assembly and pressing and bending the disc assembly against a fixed stop while the shaft and disc assembly are rotated. A pointed tool is inserted through the housing against the disc assembly to hold the latter against rotation while the shaft is carefully rotated to provide for rotational indexing of the disc assembly.