Aiming at polarization-induced signal fading phenomenon generally existing in interferometric fiber-optic sensor,the principle of polarization diversity receiver (PDR) is theoretically introduced and demonstrated by simulation. Experimental sensing system of fiber-optic Michelson interferometer based on phase generated carrier (PGC) is designed and set up. An all-fiber tri-cell polarization diversity receiver is designed to receive the signal from the sensing system. The demodulated signal is in good accordance with the simulation signal produced by a piezoelectric phase modulator in one arm of the interferometer. The fringe visibilities obtained from the three output-channels of PDR are observed with the polarization state of the interferometer changed by twisting the fiber of the interferometer. The relationship of the signal stability,self-noise of the system,and fringe visibility are obtained. The results show that polarization-induced signal fading can be inhibited by selecting an output-channel of PDR with the fringe visibility higher than 0.5.