A control knob assembly for a consumer appliance is provided. The control knob assembly provides a compact means for determining the angular position of the control knob and illuminating a plurality of indicators to communicate that angular position to a user of the appliance. More specifically, the control knob assembly includes an optical encoder disc that defines a plurality of teeth that are in operable communication with a plurality of optical sensors. The position of the sensors and the spacing of the plurality of teeth are configured to generate signals as the control knob is rotated that allow for the precise determination of the angular position of the control knob. Moreover, the optical encoder disc may fit inside a lighting assembly and may have a low profile, resulting in a compact control knob assembly that may easily fit within the area underneath the control knob and control panel.