A dual-coil inductive displacement transducer is a non-contact type measuring element for measuring displacement and is widely used in large power equipment systems such as construction machinery and agricultural equipment. However, the effect of the coil excitation method on the performance of dual-coil inductive displacement sensors has not been studied. This paper investigates the impact of different coil excitation methods on the operating performance of displacement transducers. The working principle, electromagnetic characteristics, and electrical characteristics were analyzed by building a mathematical model. A transducer measurement device was used to determine the relationship between core displacement and coil inductance. Three coil excitation methods were proposed, and the effects of the three coil excitation methods on the amplitude variation, phase shift, linearity, and sensitivity of the output signal were studied by simulation based on the AD630 chip as the core of the conditioning circuit. Finally, the study’s feasibility was demonstrated by comparing the experiment to the simulation. The results show that, under the uniform magnetic field strength distribution in the coil, the coil voltage variation is proportional to the inductive core displacement. The amplitude variation is the largest for the dual-coil series three-wire (DCSTW) and is the same for the dual-coil series four-wire (DCSFW) and dual-coil parallel differential (DCPD). DCSFW has an enormous phase shift. DCSTW has the best linearity. The research in this paper provides a theoretical basis for selecting a suitable coil excitation, which is conducive to further improving the operating performance of dual-coil inductive displacement transducers.