We present a highly sensitive force-displacement transducer capable of performing ultra-shallow nanoindentation and adhesion measurements. The transducer utilizes electrostatic actuation and capacitive sensing combined with microelectromechanical fabrication technologies. Air indentation experiments report a root-mean-square (RMS) force resolution of 1.8 nN and an RMS displacement resolution of 0.019 nm. Nanoindentation experiments on a standard fused quartz sample report a practical RMS force resolution of 5 nN and an RMS displacement resolution of 0.05 nm at sub-10 nm indentation depths, indicating that the system has a very low system noise for indentation experiments. The high sensitivity and low noise enables the transducer to obtain high-resolution nanoindentation data at sub-5 nm contact depths. The sensitive force transducer is used to successfully perform nanoindentation measurements on a 14 nm thin film. Adhesion measurements were also performed, clearly capturing the pull-on and pull-off forces during approach and separation of two contacting surfaces.