This paper is described a development of an optical fiber displacement sensor. The optical fiber sensor using an intensity modulated measures the displacement between target and sensor. A prototype sensor is composed of a transmitting part, a receiving part and a signal processing circuit. The experiment was conducted not only the sensor performance but also factors that affect intensity. The main performance of this sensor is resolution of 0.37um and the non-linearity $0.7\%$ FS and the dynamic bandwidth of about 6.3kHz. As a result of rotation test, the prototype sensor showed an equivalent performance to a commercial eddy current sensor.