Linear variable differential transformer (LVDT) is a commonly used linear displacement sensor because of its good measurement characteristics. When using laminated ferromagnetic cores in LVDTs, it is very important to take eddy currents into the account during design phase of the sensor. Particularity of the open-type core means that the eddy currents induced by the stray magnetic flux that flow in large loops tangential to the lamination surfaces take on significant values. Due to the open-type core a typical LVDT has, depending on the core material, it is, therefore, very important to take eddy currents into the account when designing the sensor. This paper’s goal is to present a methodology for calculating LVDT eddy current losses that can be applied to LVDT design in order to optimize the dimensions and help with selection of materials of the LVDTs, in order to achieve the highest measurement accuracy. Presented approach using an AτA-formulation with elimination of redundant degrees of freedom exhibits rapid convergence. In order to calculate the relationship between eddy current losses and core displacement, frequency, and material characteristics, a number of 3D finite element method (FEM) simulations was performed. Analysis of the obtained results using presented methodology for eddy current losses calculation in LVDTs enables the designer optimize the design of the LVDT.