The novel principle for changing a single HeNe laser to a displacement sensor is presented and demonstrated. By inserting a birefringence element in laser cavity, we split a frequency of the laser light into two (o-light and e-light) with an orthogonal linear polarization and a tunable frequency difference. When one mirror of the laser is moved along the laser axis, the polarization of the output light of the laser changes periodically. Each period corresponds to both the ?/2 displacement, by which the cavity mirror moves, and the variation of one longitudinal mode interval, by which the two frequencies drift. In each period, four different polarization states in the laser output (e-light, e-light and o-light, o-light, no-light) appear continuously. If the frequency difference and the cavity length are appreciated, each polarization state corresponds to both X/8 displacement of the mirror and the drift of the two frequencies by 1/4 longitudinal mode interval. Therefore, when a onetime change of the polarization is sensed by optoelectric detectors and circuits, we know that the mirror has moved by ?/8, and by counting the number of occurrences of ?/8 we can calculate the displacement of the mirror. We judge the direction of mirror movement by sensing the order of the four polarization states that appear. The moving mirror is attached to and moved with the object to be measured. This system reaches an accuracy of 0.079 µm, a measurement range of 8 mm, and a linearity of 0.0036%, and it has the function of self-calibration in accordance with laser wavelength.