The maintenance of railway systems is critical for their safe operation. However some landscape geographical features force the track line to have sharp curves with small radii. Sharp curves are known to be the main source of wheel flange wear. The reduction of wheel flange thickness to an extreme level increases the probability of train accidents. To avoid the unsafe operation of a rail vehicle, it is important to stay continuously up to date on the status of the wheel flange thickness dimensions by using precise and accurate measurement tools. The wheel wear measurement tools that are based on laser and vision technology are quite expensive to implement in railway lines of developing countries. Alternatively significant measurement errors can result from using imprecise measurement tools such as the hand tools, which are currently utilized by the railway companies such as Addis Ababa Light Rail Transit Service (AALRTS). Thus, the objective of this research is to propose and test a new measurement tool that uses an inductive displacement sensor. The proposed system works in both static and dynamic state of the railway vehicle and it is able to save the historical records of the wheel flange thickness for further analysis. The measurement system is fixed on the bogie frame. The fixture was designed using dimensions of the bogie and wheelset structure of the trains currently used by AALRTS. Laboratory experiments and computer simulations for of the electronic system were carried out to assess the feasibility of the data acquisition and analysis method. The noises and unwanted signals due to the dynamics of the system are filtered out from the sensor readings. The results show that the implementation of the proposed measurement system can accurately measure the wheel flange wear. Also, the faulty track section can be identified using the system recorded data and the operational control center data.