A versatile fiber interferometer was proposed for high precision measurement. The sensor exploited a double-cavity within the unique sensing arm of an extrinsic-type fiber Fabry-Perot interferometer to produce the quadrature phase-shifted interference fringes. Interference signal processing was carried out using a modified zero-crossing (fringe) counting technique to demodulate two sets of fringes. The fiber interferometer has been successfully employed for dynamic displacement measurement under different displacement profiles over a range of 0.7 μm to 140 μm. A dedicated computer incorporating the demodulation algorithm was next used to interpret these detected data as well as plot the displacement information with a resolution of λ/64. A commercial displacement sensor was employed for comparison purposes with the experimental data obtained from the fiber interferometer as well as to gauge its performance, resulting in the maximum error of 2.8% over the entire displacement range studied.