Semiconductor manufacturing equipment requires improvement of the accuracy by a linear encoder in a short measurement range. The error in the short range involves the interpolation error and other errors. Improvement in the interpolation error had already achieved in existing research. In contrast, this paper describes the development of a grid interferometer-type linear encoder using a hologram scale with excellent accuracy in a short measurement range. The developed encoder can achieve the error excluding interpolation error less than 10-6 magnitude per measurement range of 50 μm. In the development, error factors in the short-range measurement were examined. An equipment to identify the accuracy in this short-range measurement with high resolution and accuracy was then developed. Error analysis by the developed accuracy measurement equipment made it possible to improve a linear encoder accuracy. As a result, the accuracy of grid interferometer type linear encoder was able to reach at ±20 pm in the measurement range of 50 μm.