A high-precision etalon and novel method of construction thereof is presented. The etalon comprises a pair of plane-parallel flat mirrors spaced a first distance apart, a pair of plane-parallel spacers transversely attached to the pair of mirrors which operate to fix the first distance between the pair of mirrors, and a thin film mirror layer deposited on at least one of the pair of plane-parallel flat mirrors to form a laser cavity therein of a precise second distance apart. The method of constructing an etalon in accordance with the invention includes the steps of fabricating one or more spacers, measuring the length of the spacer(s), and deriving a dimensional deviation of the spacer length from a nominal cavity dimension specified for the etalon. A thin-film pedestal is then deposited on one, the other, or both of a first and second substrate and then coated with a reflective coating. The etalon is then assembled using the spacer(s) and first and second substrates.