A kind of high accuracy Photo-electric auto-collimator based on PSD was designed. The integral structure composed of light source, optical lens group, Position Sensitive Detector (PSD) sensor, and its hardware and software processing system constituted. Telephoto objective optical type is chosen during the designing process, which effectively reduces the length, weight and volume of the optical system, as well as develops simulation-based design and analysis of the auto-collimator optical system. The technical indicators of auto-collimator presented by this paper are: measuring resolution less than 0.05 ''; a field of view is 2 omega = 0.4 degrees x 0.4 degrees; measuring range is +/- 5'; error of whole range measurement is less than0.2 ''; Measuring distance is 10m, which are applicable to minor-angle precise measuring environment. Aberration analysis indicates that the MTF close to the diffraction limit, the spot in the spot diagram is much smaller than the Airy disk; The total length of the telephoto lens is only 450mm by the design of the optical machine structure optimization. The autocollimator's dimension get compact obviously under the condition of the image quality is guaranteed.