Part 1 of this two-part paper describes the analysis and 2D finite element (FE) simulations for a capacitive incremental position sensor for nanopositioning of microactuator systems with a displacement range of 100 μm or more. Two related concepts for a capacitive incremental position sensor are presented. In an incremental capacitance measurement mode (ICMM), the periodic change in capacitance is measured to determine the relative displacement between two periodic geometries S1 and S2 with a gap distance of ∼1 μm. In a constant capacitance measurement mode (CCMM), the distance between S1 and S2 is controlled to keep the capacitance between S1 and S2 constant. Analysis and 2D finite element simulations show that the signal-to-noise ratio for CCMM can be >300× over ICMM and with less nonlinearity of the position sensor signal. This means that CCMM will perform better in accurate quadrature incremental position detection. A comparison with measurements shows that the 2D finite element simulation method is a useful tool that realistically predicts the capacitance versus displacement for different combinations of periodic geometries.