Condition monitoring systems are increasingly being employed in industrial applications to improve the availability of equipment to increase the overall equipment efficiency. Condition monitoring of gearboxes, a key element of rotating machines, ensures to continuously reduce and eliminate costs, unscheduled downtime and unexpected breakdowns. This study demonstrates a low cost microcontroller based non-contact data acquisition system for condition monitoring of rotating machinery. Experimental validation of the proposed system was carried out by performing examination tests on a gearbox test-rig. A user friendly Graphical User Interface (GUI) was also developed which facilitate user to perform signal processing in both real-time and offline mode. With these features the proposed system can perform most of the functions available in complex, standalone machines. The use of a general purpose PC and standard programming language makes the system simple, economical, and adaptable to a variety of problems. The tests show the developed system can perform properly as proposed.