This paper proposes a method for the direct measurement of displacement through the analysis of image. We designed specimen with indicator for the image-based displacement measurement system. First, illumination system for the simple processing of image is investigated. We found that backlight system gives a high contrast image for measurement. Measurement could be done by finding the positions of 8 rectangular-shape indicators. This is done by the analysis of intensity profile along vertical direction in each region of interest. In each region of interest we find two positions of peaks. Also, for easy setup procedure, region of interest is found automatically through the analysis of edge projection profile along the horizontal direction. Current system uses two types CCD camera with image size of 640x480 pixels and 1600x1200 pixels. The number of pixel is important to resolution of measurement. To gain confidence in reliability of the system, pre-test using the Al-3%Ti thin film was performed, which is widely used in the switches and other MEMS devices. The specimen was fabricated with dimensions of 1000μm long, 1.0μm thickness, and width of 50μm. Tensile tests were performed and measured displacement using the developed system and capacitance type displacement sensor, simultaneously. Current systems are implemented on PC with 2.7GHz CPU with 752Mbyte memory and we can obtain measurements rate of 10Hz. It is possible to measure fatigue property of thin films with easy setup and accuracy by proposed system.