Ultra-low noise is a critical component in the design of high-precision sensor front-ends. We introduced differential phase-sensitive detection (d-PSD) to mitigate both multiplicative and additive noise in optical sensors, aiming for an enhanced performance and cost-effectiveness. The d-PSD combines a capacitive transimpedance amplifier (C-TIA), a delta–sigma analog-to-digital converter (ΔΣ-ADC), and a software-based lock-in amplifier (s-LIA). The first two components utilize the DDC112 (a dual current input 20-bit ADC) for a minimal analog channel length, thus reducing noise efficiently, while the latter employs a cost-effective 32-bit microcontroller unit (MCU), the HC32F460. This approach was successfully implemented as the front-end for a smart optical sensor. Testing indicated that the sensor achieved an equivalent current noise level of 0.6 nA/√Hz, primarily attributed to the light source driver rather than the sensor’s front-end circuit. The sensor exhibited an exceptional performance, with a 3σ measurement precision of 5.4 × 10−4 over a 1-second integration time and a dynamic range of 100 dB, leveraging the proposed method and design. Furthermore, the front-end of the sensor boasts a compact size, low power consumption, and affordability, making it an ideal, versatile solution for ultra-high precision, smart optical sensors.