This paper presents a novel, non-contact displacement sensor based on the eddy current sensing technique. The moving part of the sensor is a conductive sheet with a simple surface groove. This part is easy to fabricate as the machining process required is simple. The moving part is not electrically connected to the measurement system, like the eddy current proximity sensor. The displacement of the moving part is determined by the change in the inductance of four identical stationary planar coils kept underneath the moving part. A signal conditioning circuit is presented in this paper which measures the difference in inductance between two coils. A suitable algorithm has been developed to calculate the displacement using the corresponding inductance values. A prototype has been fabricated in the laboratory to evaluate the performance. The test result shows that the maximum error is less than 1.65%. The output of the prototype sensor was linear for the full range, as expected. It is well suited for application where the vertical space available for the installation is limited. The overall thickness of the developed sensor is less than 5 mm.