Real-time detection of liquid level in complex environments has always been a knotty issue. In this paper, an intrinsically safe liquid-level sensor system for flammable and explosive environments is designed and implemented. The poly vinyl chloride (PVC) coaxial cable is chosen as the sensing element and the measuring mechanism is analyzed. Then, the capacitance-to-voltage conversion circuit is designed and the expected output signal is achieved by adopting parameter optimization. Furthermore, the experimental platform of the liquid-level sensor system is constructed, which involves the entire process of measuring, converting, filtering, processing, visualizing and communicating. Additionally, the system is designed with characteristics of intrinsic safety by limiting the energy of the circuit to avoid or restrain the thermal effects and sparks. Finally, the approach of the piecewise linearization is adopted in order to improve the measuring accuracy by matching the appropriate calibration points. The test results demonstrate that over the measurement range of 1.0 m, the maximum nonlinearity error is 0.8% full-scale span (FSS), the maximum repeatability error is 0.5% FSS, and the maximum hysteresis error is reduced from 0.7% FSS to 0.5% FSS by applying software compensation algorithms.