Bound-state spectra of shifted Deng-Fan oscillator potential are studied by means of a generalized pseudospectral method. Very accurate results are obtained for both low as well as high states by a nonuniform optimal discretization of the radial Schrödinger equation. Excellent agreement with literature data is observed in both s-wave and rotational states. Detailed variation of energies with respect to potential parameters is discussed. Application is made to the ro-vibrational levels of representative diatomic molecules (H2, LiH, HCl, CO). Nine states having are calculated with good accuracy along with 15 other higher states for each of these molecules. Variation of energies with respect to state indices n, show behavior similar to that in the Morse potential. Many new states are reported here for the first time. In short, a simple, accurate, and efficient method is presented for this and other similar potentials in molecular physics. © 2013 Wiley Periodicals, Inc.