Aspects of this invention include a downhole tool having an angular position sensor disposed to measure the relative angular position between first and second members disposed to rotate about a common axis. A plurality of magnetic field sensors are deployed about the second member and disposed to measure magnetic flux emanating from first and second magnets deployed on the first member. A controller is programmed to determine the relative angular position based on magnetic measurements made by the magnetic field sensors. In a one exemplary embodiment, a downhole steering tool includes first and second magnets circumferentially spaced on the shaft and a plurality of magnetic field sensors deployed about the housing.