For physical models, conventional techniques have difficulties in monitoring internal displacements during laboratory testing. In this paper, based on fiber Bragg grating (FBG) sensing technology, a bar-type fiber optic displacement sensor is developed for small-scale models. When the model deforms due to loading or unloading, the embedded displacement sensor can capture the displacement profile along the bar length using the strain data from quasi-distributed FBGs. Laboratory calibration tests have showed that the displacements measured by the FBG sensing bar are in good agreement with those from conventional displacement transducers. For the physical models of a gravity dam and a cavern group, the FBG sensing bars were successfully installed in predefined holes, together with conventional gauges. During testing, the FBG sensing bars measured the displacement distributions within the models. The fiber optic monitoring results demonstrate the deformation characteristics of surrounding rock masses induced by overloading and underground excavation and indicate the overall stability conditions of these two geo-structures.