For the motion control of industrial robots, the end-effector performance is of the ultimate interest. However, industrial robots are generally only equipped with motor-side encoders. Accurate estimation of the end-effector position and velocity is thus difficult due to complex joint dynamics. To overcome this problem, this paper presents an optical sensor based on position sensitive detector (PSD), referred as PSD camera, for direct end-effector position sensing. PSD features high precision and fast response while being cost-effective, thus is favorable for real-time feedback applications. In addition, to acquire good velocity estimation, a kinematic Kalman filter (KKF) is applied to fuse the measurement from the PSD camera with that from inertial sensors mounted on the end-effector. The performance of the developed PSD camera and the application of the KKF sensor fusion scheme have been validated through experiments on an industrial robot.