Eddy current displacement sensors are popular for sensing changes in displacement in industrial fields with many advantages. The eddy current induced by a conventional coil is distributed over a large range and the energy is not concentrated. The size of the minimum measured surface is 1.5 to 3 times the diameter of the coil. A magnetic head-based eddy current displacement sensor is proposed in this paper. Theoretical analysis confirms that the coil generates a highly concentrated magnetic field at the magnetic core gap. The simulations based on the finite element method are performed. The simulation results demonstrate that the proposed method can induce the eddy current field which has a small distribution range and high degree of concentration of energy on the surface of the specimen. Finally, experiments are conducted for different sized ring-shaped surfaces. The high similarity between the experimental results indicates that the magnetic head-based eddy current displacement sensor can induce a highly focused eddy current field with a distribution range of 3 mm. The sensitivity of the sensor is 5 V mm−1 and the spatial resolution of the sensor is 3 mm.