Displacement transducers based upon quantum mechanical tunneling of electrons can potentially achieve a sensitivity far superior to conventional transducers. The reason for this is that the dynamical influence of the tunneling transducer on a test mass is insignificant compared to that of traditional capacitive, inductive or piezoelectric transducers. Thus the fluctuating ‘‘back action’’ force from electrical noise in the tunneling transducer is nearly eliminated. The ‘‘back action’’ force becomes dominant as the test mass is miniaturized, thus the tunneling transducer may be especially useful in micro‐fabricated sensors. In this paper we present an equivalent circuit model for a tunneling transducer including noise and outline a method for calculating the minimum detectable signal in any given application. We also discuss some practical limits for tunneling‐based sensors.