This paper presents the theory and implementation of a novel sensor system for measuring the angular speed (AS) of a shaft rotating at a very low speed range, nearly zero speed. The sensor system consists mainly of an eccentric sleeve rotating with the shaft on which the angular speed to be measured, and an eddy current displacement sensor to obtain the profile of the sleeve for AS calculation. When the shaft rotates at constant speed the profile will be a pure sinusoidal trace. However, the profile will be a phase modulated signal when the shaft speed is varied. By applying a demodulating procedure, the AS can be obtained in a straightforward manner. The sensor system was validated experimentally based on a gearbox test rig and the result shows that the AS obtained are consistent with that obtained by a conventional encoder. However, the new sensor gives very smooth and stable traces of the AS, demonstrating its higher accuracy and reliability in obtaining the AS of the low speed operations with speed-up and down transients. In addition, the experiment also shows that it is easy and cost-effective to be realised in different applications such as condition monitoring and process control.