With the rapid development of precision manufacturing industry, the demand for precision measurement technology is increasing fast. Displacement detection technology is the basis of geometric precision measurement and is widely used in the field of contemporary precision manufacturing. The chromatic confocal displacement measurement system has the advantages of insensitivity to stray light, tilt of the measured object, and materials type, as well as high measuring frequency and high resolution. It can detect displacement, surface roughness, three-dimensional topography and the thickness of single-layer or multi-layer transparent materials. So it plays an significant role in the field of precision displacement measurement. In recent years, the chromatic confocal measurement technology using diffractive optical elements to improve the performance of optical system has been widely studied by domestic and foreign scholars. In this paper, the research progress of chromatic confocal displacement measurement based on diffraction dispersion principle was summarized. Firstly, the principle of chromatic confocal displacement measurement and the characteristics of diffractive optical elements were introduced. Then, the development history and research progress of chromatic confocal displacement measurement technology based on diffractive dispersion principle were described. Finally, the development trend of this technology was prospected.