With the advantages of high resolution, structural simplicity, reliability, compact size, and high sensitivity, inductive sensors have been widely used in nanopositioning systems. However, the measuring range of traditional inductive sensors are usually limited to 0.2 mm. A novel analysis and design methodology of the miniaturized inductive sensor with large measuring range and nanoscale resolution is proposed. Firstly, an accurate leakage inductance model is established. Secondly, a design rule of armature size is proposed by considering the fringing effect. Then, the error terms introduced by the measurement circuit of differential inductive sensors are analyzed and the corresponding error suppression methods are illustrated. Moreover, A design rule of selecting the optimal excitation frequency is proposed to meet the requirements of high Q value and high bandwidth, and to minimize the impact of core loss resistance on the performance of the sensor. Validated by the experiments, the proposed analysis and design method can effectively guide the design of the miniaturized inductive sensor with nanoscale resolution in the measuring range of ±0.5 mm. The overall size of the fabricated sensor prototypes is less than 6 mm × 6 mm × 3 mm. Combined with large range, high resolution and ideal miniaturization, this inductive sensor can be well suitable for compact and large stroke nanopositioning systems.