The relative simplicity of conventional optical microscopes makes them well suited to the role of automated instruments for process control, but there are doubts about their ability to meet the demands of 0.5μm processes because of insufficient resolution. The resolution limit derived from the Rayleigh criterion is misleading when applied to the measurement of lines on wafers, for which it is shown that measurement linearity can be achieved with feature sizes as small as 0.3μm by reducing the illumination wavelength below 450nm. The sensitivity of the instrument to changes in the shape of 0.3μm and larger features caused by process variations can be reduced to acceptable levels by a careful choice of measurement and focusing algorithms. The measurement of overlay error requires careful choice of optical components and accurate alignment if unacceptable systematic errors are to be avoided. Random errors can be minimised by using focused images and eliminating shifts in the wafer position during the measurement. As a result, measurement repeatability of 0.02μm (three time standard deviation) and accuracy of better than 0.01μm can be obtained with layer separations from up to at least 4μm.