There is provided an interpolation circuit of an optical encoder including a phase shifter circuit, two multiplexers, two digital circuits and four comparators. The phase shifter circuit receives signals sequentially have a 90 degrees phase shift and outputs multiple phase shifted signals. Each of the two multiplexers receives a half of the multiple phase shifted signals and outputs two pairs of phase shifted signals, each pair having 180 degrees phase difference, respectively to two comparators connected thereto. Each of the two digital circuits controls the corresponding multiplexer to select the two pairs of phase shifted signals from the half of the multiple phase shifted signals.