The invention relates to a shift rail position sensing system. There is a need for a rapid and accurate shift rail position sensing system. In a transmission shift mechanism shifts are performed by axially moving a shift rail which is slidable in a rail bore in a housing. A rail position sensing system includes a groove formed in the shift rail and a Hall effect sensor. The groove includes a curved bottom surface, a first ramp surface extending from one side of the bottom surface to an outer peripheral surface of the shift rail, and a second ramp surface extending from a second side of the bottom surface to an outer peripheral surface of the shift rail. The Hall effect sensor has a sensor shaft with an axis normal to an axis of the shift rail. The sensor shaft has a sensing tip which adjacent to and spaced apart from the groove, so that the Hall effect sensor is sensitive an entire range of positions of the shift rail.