With the rapid development of precision manufacturing industry, the demand for precision measurement technology is increasing fast. Displacement detection technology is the basis of geometric precision measurement and is widely used in the field of contemporary precision machinery manufacturing. The chromatic confocal displacement measurement system has the advantages of insensitivity to ambient light, tilt of the measured object, materials, high measure speed and high resolution. So it plays an significant role in the field of precision displacement measurement. The chromatic confocal displacement measurement system includes confocal optical system, spectral detection system and spectral data processing system. In recent years, researchers have widely studied the spectral confocal displacement measurement system using diffractive optical elements. This paper mainly summarizes the structure optimization of confocal optical system by diffractive optical elements. We Firstly introduced the principle of chromatic confocal displacement measurement and the principle of spectral confocal displacement measurement based on diffraction dispersion principle. Then, the development status of key technologies of chromatic confocal displacement measurement based on diffractive dispersion principle is summarized. The development trend of this technology is prospected in the end of this paper.