The working condition of shaft determines whether the ship can continuously acquire propulsive force from diesel engine. It is hard to operate the contact measurement of shaft power and torque neither is it accurate, so the noncontact measurement that is easier and more flexible to use should be the direction to go. A novel contact-less shaft condition monitoring system based on photo-electronic technology is proposed in this paper. Two coding wheels and optoelectronic position sensors are settled to detect the torsion angle of a length of shaft, and the torsion angle of shaft can be quantified by logic circuits in field programmable gate array (FPGA) according to counter frequency and central angle of vane. And then the power and torque on shaft can be worked out in computer. To avoid the drift of optoelectronic device, a logic algorithm was studied to eliminate the bias of trigger point for position detector. The experimental result shows that this method is adequate for measuring the torsion angle of shaft, and gets rid of the redundant optical fiber which might induce danger in online monitoring of rotating shaft system. The design of this monitoring system gives an idea for monitoring and diagnosis of not only the shaft of marine propulsion system but also large rotating machines.