A π phase-shifted fiber Bragg grating (PS-FBG) with reduced diameter is proposed for sensing applications. To achieve high sensitivity, etching and side polishing are used to decrease the diameter of the PS-FBG. The transmission peak undergoes a clear redshift with refractive index increase, and the sensitivity is 3815 pm/RIU when the surrounding refractive index ranges from 1.41514 to 1.45450. The structure is also sensitive to ambient temperature from 25 to 55 °C. Experimental results show that the temperature sensitivities are 12.26, 12.54, and 19.51 pm/℃ for PS-FBGs with diameters of 125, 87, and 52 μm, respectively. The effect of the pump power on the sensing performance is also studied.