An optical fiber displacement sensor has the advantages of relatively simplicity, cheap, small probe size and immunity against environmental perturbation. The working principle of the sensor is based on the intensity modulation that is detection light intensity reflecting from the surface being measured. This paper presents the mathematical model of displacement measurement mechanism of this sensor type. The theoretical and experimental data are compared to verify the model in describing the realistic approach to sensor design. Finally, the analysis results show that displacement response characteristics such as sensitivity, measuring range are easily modified by principal design parameters such as magnitude of optical Power, diameter of optical fiber core and distance between transmitting fiber and receiving fiber.