A novel biochemical sensor based on planar optical waveguide is presented in this paper. The features of the sensor are as follows, the planar optical waveguide is made of SOI (Silicon-On-Insulator) material, a Mach Zehnder (M-Z) Interferometer structure is adopted as the sensing part, the sensor chip is fabricated using CMOS compatible technology and the size of the sensor chip is on the micron scale. Compared with the traditional biochemical sensors, this new type of sensor has such notable advantages as miniaturization, integration, high sensitivity and strong anti-interference capability, which provide the sensor with potential applications where traditional biochemical sensors cannot be used. At first, the benefits of SOI material comparing to other optical waveguide materials were analyzed in this paper. Then, according to the optical waveguide mode theory, M-Z interferometer waveguide was designed for the single mode behavior. By theoretical analysis of the radiation loss in the Y-junction of the planar waveguide interferometer, the relationship between the branch angle and the radiation loss was obtained. The power transfer function and the parametric equation of sensitivity of the M-Z interferometer were obtained through analysis of the waveguide structure. At last, the resolution of the effective refractive index and the characteristics of sensitivity of the sensor based on SOI M-Z Interferometer waveguide were simulated and analyzed by utilizing MATLAB software. As a result, the sensitivity of SOI M-Z Interferometer sensor can reach the order of 10-7 magnitude.