On-line vibration monitoring plays an important role in the fault diagnosis and prognosis of industrial belt drive systems. This paper presents a novel measurement technique based on electrostatic sensing to monitor the transverse vibration of power transmission belts in an on-line, continuous, and non-contact manner. The measurement system works on the principle that variations in the distance between a strip-shaped electrode and the naturally electrified dielectric belt give rise to a fluctuating current output. The response of the sensor to a belt moving both axially and transversely is numerically calculated through finite-element modeling. Based on the sensing characteristics of the sensor, the transverse velocity of the belt is characterized through the spectral analysis of the sensor signal. Experiments were conducted on a two-pulley belt drive system to verify the validity of the sensing technique. The belt vibration at different axial speeds was measured and analyzed. The results show that the belt vibrates at well-separated modal frequencies that increase with the axial speed. A closer distance between the electrode and the belt makes higher order vibration modes identifiable, but also leads to severer signal distortion that produces higher order harmonics in the signal.