Abstract: On the basis of working principle and its characteristics of linear variable differential transformer (LVDT) displacement sensor, this paper put forward a method to deal with the nonlinear issue of output signals at both ends of the sensor using Chebyshev best approximation principle. The sensor's effective range is adaptively divided into linear and nonlinear regions, linear processing would be made for signals of two regions, respectively. The linear working range and the corresponding linear approximable straight-line function of the sensor are determined according to Chebyshev best approximation principle,while signals in nonlinear regions are linearized using rational B-spline function. A signal processor was designed based on MSP430 microcontroller and a test platform composed of a stepper motor straight-line units and a standard laser sensor was established. Experiments have been implemented to verify the feasibility of proposed method with 85 mm range of LVDT displacement sensor. The results show that this method can effectively improve the linearity and precision of the sensor and extend the working range of displacement sensor.