In this paper, an all fiber optic sensor based on a Mach-Zehnder interferometer (MZI) has been proposed for the simultaneous measurement of underwater pressure and temperature, utilizing a dualmode fiber (DMF) which has been specially designed, and supporting only the LP01 and LP02 modes propagating in the fiber. In this design, an in-line MZI sensor that was constructed by splicing a DMF between two pieces of single mode fibers, shows a critical wavelength (CWL) which exists in the transmission spectrum of the LP01-LP02 mode interference. Since the two peaks, located closest to the CWL (and from both lower and higher wavelengths), shift in opposite directions and show different sensitivities under temperature and water pressure variations, the DMF-MZI sensor is capable of measuring both the water pressure and the temperature simultaneously. The CWL-based interference spectrum is stable with the variation of underwater salinity or impurities seen around the fiber surface and independent of the polarization states of the transmission light. As a result, in the operation of the DMF-MZI sensor, underwater pressure and temperature sensitivities increase significantly, when the peak wavelengths are close to that of the CWL. A theoretical analysis has been developed and used to predict that the sensitivities of this specific DMF-MZI structure which can be further improved by increasing the physical length of the DMF and by adjusting the position of the first left/right peak to be closer to the critical wavelength. This co-located, multi-parameter all-fiber sensor developed in this way and showing relatively high sensitivity is easy to implement in the underwater environment. It does not require a complex shell design and the peaks nearest to a CWL are convenient, allowing easy identification and detection, thereby providing a large measurement range to satisfy the requirements of practical marine and fresh water measurements. INDEX TERMS fiber sensor, temperature, pressure, dual mode fiber, Mach-Zehnder interferometer.