This paper presents a novel reflection coefficient correction technique for an optical fiber displacement sensor. The new technique uses conventional fiber prove, however, displacement signal and reflection coefficient signal are simultaneously detected with it, where illumination fiber functions for both irradiating a target plane and detecting reflection light from the target. An experimental setup consists of commercially available fiber prove and a laser diode was bulit, and it was found that measuring error was less than 0.05 μm even in case of target reflection coefficient changing from 40% to 95%. In this paper, measuring principle and design method for the optical system are described, also, some experimental results are discussed.