We present the theoretical operation and experimental results of a fiber optic interferometer, which we have used to measure the surface displacement of a collagen gel. Dispersed within the collagen gel are fibroblast cells. We describe a measurement system to assist in the detailed study of the biochemical and mechanical processes involved in fibroblast cell contraction. The interferometric system is non-contacting and offers a large dynamic range of measurement. Digital demodulation of a phase generated carrier results in an experimental sensitivity limit on the order of tens of nanometers with a measurement range of up to 2 mm. Computer-controlled data acquisition allows measurement of the contracting gel host over a period of several hours. We describe the optical interferometric system and present experimental results on a contracting collagen gel.