The most widely used clinical technique for estimating bone movements in knee joints with acceptable accuracy utilises implantation of heavy metallic beads into the bones. These small metallic objects become visible as highly contrasting features in captured radiographs, thus facilitating post kinematic assessment of bones in human joints with pinpoint accuracy. Although, this approach provides necessary precision for clinical diagnosis, pre‐ and post‐surgery planning for restoring joint function and locomotion, however, this approach also incurs high degree of invasiveness. In this study, a novel optical sensor is proposed for use in non‐invasive motion measurement of knee joints in three‐dimensional (3D) space. The approach is based on 3D angle‐of‐arrival (AoA) estimation using image processing procedures on the two‐dimensional images of sensor's aperture shadows. The novelty of the sensor in terms of design, operation and its potential applications for a wide range of possibilities including precise AoA estimation for unconstrained 3D motion analysis of knee joints is described. Finally, error analysis of the sensor's AoA measurement uncertainty is provided for different incident angles of optical beams, which demonstrates the potential of the sensor not only for high‐precision motion analysis of human joints; however, for other motion and position‐aware systems.