A lateral wavefront shearing interferometer is presented. Two diffraction gratings are used as beam splitters in the Fraunhofer planes of two successive image forming systems. Each diffraction order of the first grating forms an image of the object in an intermediate image plane. These are completely separated from each other, so that all but two can be blocked out. Then the second grating, together with the second image forming system, creates two partially overlapping sets of images of the two passing intermediate images. A variable lateral shear between these two sets is achieved by rotation of the gratings in opposite senses. The principle of this shearing interferometer has been experimentally verified. It can be simplified by folding so that only one grating and one image forming system are needed. Furthermore, a sine wave generator using an extended, polychromatic source is presented which is built on this principle. © 1967 Optical Society of America.