This thesis presents the development of a contactless sensing system and the dynamic evaluation of an air-bearing based precision wafer positioning system. The contactless positioning stage is a response to the trend seen in the high-tech industry, with the substrates becoming thinner and larger to reduce the cost and increase the yield. With contactless handling, it is possible to avoid damage and contamination. The system works by floating the substrate on a thin film of air. A viscous traction force is applied on the substrate by steering the airflow. A cascaded control structure has been implemented to the contactless positioning system, where the Inner Loop Controller (ILC) controls the actuator which steers the airflow and the Outer Loop Controller (OLC) controls the position of the substrate by controlling the reference of the ILC. The dynamics of the ILC are evaluated and optimized for the performance of the positioning of the substrate. For the OLC a linear charge-coupled device (CCD) has been implemented as a contactless sensing system. The sensing concept is implemented in the contactless actuation system and the results are presented.