This paper presents the full research and development cycle of a high-precision absolute linear encoder based on a standard calibrated scale. Already available and used in industry standard scales of invar alloy were employed in the study. The scales have incremental indexes with 1 mm spacing intervals without an absolute code. However, the existing technical task is to measure the absolute position in the range of 2 m with accuracy less than 5 μm. For that, the developed encoder rationally combines magnetic measuring channel for the index numbering and an optical channel for the precise estimation of the encoder position. First, for the development, a simulation was performed to synthesize and analyze an image of an index. This image was used to develop a real-time double-threshold image processing algorithm to estimate the index position. Later the developed image processing algorithm was verified by preliminary testing and supported by a presented three-stage calibration procedure. The final measurements proved that the designed and developed encoder has the accuracy of 1.65 μm (3 standard deviations) at the speed up to 3 m/s. The possibility of use of standard calibrated scales with the presented encoder to solve existing and new industrial tasks forms the value of this paper. A possible use of the existing scales also provides unification and compatibility with conventional metrology equipment.