We propose a compensation technique based on pulse reference for intensity-modulated optical fiber sensors that can compensate the power fluctuation of the light source, the change of optical components transmission loss, and the coupler splitting ratio. The theoretical principle of this compensation technique is analyzed and a temperature sensor based on fiber coating-covered optical microfiber is carried out to demonstrate the compensation effect. The system noise is measured to be 0.0005 dB with the temperature sensitivity reaching 0.063dB/°C, and the output drift is 0.006 dB in 2 h at room temperature. The output shows a slight variation (0.0061 dB) when the light source and the common light path suffer a 3 dB attenuation fluctuation.