In this work, we describe our recent efforts aimed at determining the mechanism of signal change for a diffraction-based sensor (DBS) system. The DBS detects analyte-binding events by monitoring the change in diffraction efficiency that takes place when analyte molecules adsorbs to target molecules that have been patterned onto a surface. The exact parameters that affect the intensity of the diffraction intensity are not immediately clear. In this work, it is hypothesized that the intensity of the diffraction signal depends both on the thickness of the diffraction grating and the refractive index of the analyte molecule. This hypothesis has been tested by preparing diffraction grating targets of well-defined thickness from polyelectrolyte multilayers. The index of refraction of the layers was also adjusted by incorporating charged Au nanoparticles into the diffraction grating structure. Results of these experiments are discussed in terms of simple models based on volume-phase holography.