An angular displacement sensor based on a flexible varied-line-space grating was developed for the fly-by-light flight control system. The main factors effecting on the sensor precision and the process for sensor fabrication were discussed. Firstly, the principle of the sensor was introduced based on the key role of cylindrical varied-line-space grating played in the displacement sensor. Then, the effects of process errors on sensor precision were analyzed, and a conclusion was pointed out that the inner surface roundness of the cylindrical varied-line-space grating should be limited to be less than 0.01 mm when it was shaped from the flexible varied-line-space grating. According to analysis results, an accurate forming process was adopted, and its feasibility was conformed by ANSIS analysis. Experimental results show that the inner surface roundness of the sensor can be 0.004 3 mm, and the sensor linearity can be 0.27% of the full range.Obtained results meet the precision requirement of the aero-sensors.