Abstract: A displacement sensing system and method addresses demanding requirements for high precision sensing of displacement of a shaft, for use typically in a linear electro-dynamic machine, having low failure rates over multi-year unattended operation in hostile environments. Applications include outer space travel by spacecraft having high-temperature, sealed environments without opportunity for servicing over many years of operation. The displacement sensing system uses a three coil sensor configuration, including a reference and sense coils, to provide a pair of ratio-metric signals, which are inputted into a synchronous comparison circuit, which is synchronously processed for a resultant displacement determination. The pair of ratio-metric signals are similarly affected by environmental conditions so that the comparison circuit is able to subtract or nullify environmental conditions that would otherwise cause changes in accuracy to occur.