Most domestic fossil power plants have exceeded 100,000 hours of operation with severe operating conditions. Among the critical components of fossil power plant, high temperature steam pipe systems have had many problems and damage from unstable displacement behavior because of frequent start ups and shut downs. In order to prevent serious damage and failure of the critical pipe system in fossil power plants, 3-dimensional displacement measurement system was developed for on-line monitoring. The displacement measurement system was developed with a use of a LVDT type sensor and a rotary encoder type sensor. This system was successfully installed and operated on a real power plant.