Measuring the vibration displacement of the fuel pin is crucial for determining the vibration level and monitoring the condition of the fuel pin and assembly. A miniaturized displacement sensor based on the fiber Fabry–Perot (F–P) was designed and fabricated, and the overall cylindrical dimensions of the encapsulated fiber F–P sensor were 30 mm × 6.5 mm. Its working principle, characteristics, and structure parameters were analyzed in detail. Experimental results showed that the measurement range of displacements was up to approximately 1250 μm in humid environment. And the root mean squared error values of ~0.112 and ~0.144 showed that the sensor worked well in humid and high‐temperature environments. Experimental results indicated that the developed F–P sensor, featuring compact dimensions and high performance, had significant application value and great potential for monitoring the vibration and accessing the damage of the fuel pins.