A light-emitting diode can be used simultaneously for illumination of a moving object and also for detection of its own reflected light. The result is a novel optical object proximity sensor of very small size and high resolution. Good performance depends on the design of a suitable low-noise electronic preamplifier, on the choice of light-emitting diode material and bias, and on efficient optical design using a mirror or thin-film retroreflector. This optimization is analyzed and implemented.