A newly designed inductive micro displacement detecting system is presented. The proposed inductive system consists of driving coils, position-detecting coils, cores, and closed-loop formed magnetic blocks. The cores and magnetic blocks are made of Mn-Zn ferrite. When AC sine wave is applied to the driving coils, the time derivative flux is generated within the system, and then induced voltages arise in the position-detecting coils according to the core`s position. Putting the cores to be moved proportionally to the input displacement, the induced voltage is proportional to input displacement. The parameters that affect the system characteristics are turn ratio, air-gap size, excitation frequency, overlap area, load resistance, capacitance effect, and so forth. Based on the experimental results, the system parameters are selected in such a way as to have high sensitivity ad stable responses. The sensitivity of the proposed inductive displacement-detecting system is greater than 2800mV.V-1mm-1 and the linearity error is below $pm$0.10% in the range of $pm$200㎛.