This paper presents an automatic inspection method of VCR head assembly tolerances using optical interferometry. Theoretical analysis and measuring principles of this method are presented. Measuring accuracy of VCR head is intrinsically affected by the assembly errors existing in the measuring device. These errors are represented by drum loading error, beam splitter and mirror's perpendicularity, and positioning error of gap sensor. Detailed effects of these errors are analyzed, and appropriate recipes are presented. Image processing algorithm for automatic measurement is composed of three parts; i.e. decision of fringe existence, detection of azimuth line, and searching for fringe center. Especially, the algorithm for detection of azimuth line can be performed for various shapes of VCR heads.