Precise encoder and grating ruler are often used to measure and position in CNC system. In indexable inserts peripheral grinding CNC system, incremental grating encoder was applied to measure displacement for the blade feed axis because this axis returned to the reference point in a single direction. For the grinding wheel axis, an incremental grating encoder with distance-coded was used to determine absolute position after the system was powered. High-speed finding zero algorithm based on distance-coding made auto-finding-zero into reality. Besides, the algorithm itself was very simple. The experimental results indicate that the proposed method has its prominent superiorities in speed, accuracy over the ordinary incremental encoders and can meet the requirements of precise motion contro1 in CNC system, which means it has high practical value．