This paper presents the results obtained from a fundamental study on eddy-current linear encoders. We propose eddy current linear encoders as a replacement for optical and magnetic encoders. Eddy current linear encoders are linear displacement and position sensors that are used in eddy-current tests. Linear displacement and position are detected by counting cracks on a scale from the change in the induced voltage of the detecting coil. They are expected to have unique advantages in reducing costs and enabling shields and gaps to be used between the detector and scale. We report experimental results on the output characteristics of an eddy current linear encoder and the characteristics of the gap between the coil and scale. The effects of the ferrite core, the effects of ferrite size, and the output characteristic of a 1-mm pitch scale obtained by simulation are also reported.