This paper describes the fabrication of a large area sinusoidal grid surface, which is used as the measurement reference of a surface encoder for multi-axis position measurement. The profile of the grid surface is a superposition of sinusoidal waves in the X-direction and the Y-direction with spatial wavelengths of 100 μm and amplitudes of 100 nm. Diamond turning with a fast tool servo (FTS) was chosen as the fabrication method. The constructed FTS, which employs a piezoelectric tube actuator (PZT) to actuate the diamond tool and a capacitance probe as the feedback sensor, was confirmed to have a bandwidth of approximately 2.5 kHz and a tool displacement accuracy of several nanometers in the closed-loop mode. Experiments of fabricating the sinusoidal grid surface were performed on a commercially available precision diamond turning machine. An aluminum alloy workpiece was vacuum chucked on the spindle and the FTS was mounted on the X-slide. Efforts were made to position the tool tip to the center of the spindle (center-alignment) since it was verified that the center-alignment is important for the fabrication accuracy of the sinusoidal grid surface. An evaluation technique based on the two-dimensional (2D) discrete Fourier transform (DFT) of interference microscope images was also developed to evaluate the fabricated grid surface effectively. The fabrication result of a grid surface over an area of 150 mm has indicated the effectiveness of the fabrication system.