A system and method for diagnosing a misalignment condition during operation of a continuous oven, which includes a conveyor system conveying and positioning trays carrying panned baked goods within an oven bake chamber defined at least in part by two side panels extending parallel to one another. The system includes an optical sensor arrangement having a transmitter and a receiver disposed along a line of sight, the line of sight extending across a location of the oven bake chamber such that a misaligned tray or mis-positioned utensil moving on the conveyor system disposed within the oven cavity interrupts the line of sight, which in accordance with the method causes the optical sensor system to provide a signal indicative of the misalignment condition.