A displacement sensor based on the ratio of fiber‐optic light emitted from two fixed position optical fibers into a third, movable fiber connected to a photodetector is described. Square‐wave modulated light of opposite phases produces a corresponding square wave at the detector which has zero ac amplitude at the center position and an amplitude proportional to displacement on either side of the detection fiber. A phase‐sensitive detector produces a positive dc output voltage for positive displacements and negative for negative displacements.