In May 1990, a quartz tube extensometer was installed in the Sopronbánfalva Geodynamic Observatory of the Geodetic and Geophysical Research Institute (GGRI) of the Hungarian Academy of Sciences for recording Earth tides and recent tectonic movements. The paper describes the construction of the extensometer and a portable calibrator used for the in situ calibration of the instrument. The extensometer is very sensitive. Its scale factor is 2.093+/-0.032 nm/mV according to the highly precise calibration method developed at the GGRI. Since the stability of extensometers is strongly influenced by the geological structure and properties of the rocks in the vicinity of the recording site, the observatory instrument system was tested by coherence analysis between theoretical (as the input signal) and measured tidal data series (as the output signal). In the semidiurnal tidal frequency band the coherence is better than 0.95, while in the diurnal band it is about 0.8. Probably this is due to the fact that the noise is higher in the diurnal band (0.4-0.5 nstr) than in the semidiurnal band (0.19-0.22 nstr). Coherence analysis between theoretical and measured data corrected for barometric changes yielded a small improvement of coherence in both frequency bands, while using temperature data correction, no observable improvement was obtained. Results of the tidal analysis also show that the observatory instrument system is suitable for recording very small tectonic movements. The 18 years of continuous data series measured by the extensometer prove the high quality of the extensometer. On the basis of investigations, it was pointed out that further efforts should be done to improve the barometric correction method and that correction for ocean load, as well as considering topographic and cavity effects are necessary to increase the accuracy of determining tidal parameters.