Strain measurement is important in mechanical testing. There are many strain measurement methods; namely electrical resistance strain gauge, extensometer, Geometric Moiré technique and optical strain measurement method among others. Each method has its own advantages and disadvantages. There is always a need to develop a precise and yet simple strain measurement method in mechanical testing. The objective of this study is to develop a two-dimensional deformation measurement algorithm that calculates the strain in a loaded structural component. This can be achieved by using the digital image correlation technique which compares the displacement of the random speckles pattern in the reference and the deformed images. The strain measurement algorithm was coded into MATLAB program utilizing the MATLAB's Image Processing toolbox. Next, tensile test experiments for two different materials were conducted and videos were recorded simultaneously by using a consumer version of high-definition video camera. The recorded videos (images) were then analyzed and the strain values were determined by using the optical strain measurement method. The modulus of elasticity of the respective materials was then determined and the results obtained by the extensometer and the optical strain measurement method were compared to each other. The modulus of elasticity of the mild steel and the polypropylene specimens were found to be 5.1 and 2.4 off the benchmark values, respectively. A good agreement was achieved upon comparison between the results determined by the two methods mentioned above. In conclusion, the two-dimensional deformation measurement algorithm had been successfully developed. © 2013 Asian Network for Scientific Information.