Pseudorandom position encoder, which employs two code tracks for absolute position measurement, represents one of the latest trends in the development of the absolute position encoders. One sensor head is used for pseudorandom code reading and two additional sensor heads are used for generating synchronization pulses and motion direction determination. Special attention is devoted to the zero position adjustment after the installation of the encoder on the motor shaft. A novel solution for the improved zero position adjustment incorporated in the functional algorithm of the encoder is presented in this paper. The presented solution offers a reliable procedure for the zero position adjustment, taking into account possible motion direction changes during the zero position adjustment process. The algorithm for the zero position adjustment executes only once and does not participate further in the absolute position measurement process. The functioning of the proposed algorithm is described in more details considering one concrete example of the encoder. [Projekat Ministarstva nauke Republike Srbije, br. TR32045]