The hydrostatic leveling system based on the connecting pipe principle has important application value in the field of settlement monitoring. In this paper, a novel fiber Bragg grating (FBG) hydrostatic level based on elliptical ring is proposed. In this study, the vertical and lateral deformations of elliptical ring under concentrated force is analyzed using force method and Mohr integral. Thereby, the deformation-coordination equation of the elliptical ring and the diaphragm is constructed. The temperature self-compensation model for the elliptical ring is established from the three levels of material, structure, and device. A complete set of theories and methods for the designed FBG hydrostatic level is proposed. Furthermore, the tests of the sensitivity, resolution, and temperature self-compensation for the encapsulated sensors are carried out by multi-point loading experiment. The experimental results show that in the range of 0∼100 mm, the sensitivity of the sensor is close to the theoretical analysis, which is about 12 pm/mm. The effective resolution can reach 0.025∼0.05 mm, with the sensitivity coefficient to temperature as low as only 1.46 pm/°C.