Machining precision deficiency and installing error are very common problems for many sensors, which may result in unstable amplitude i the signal detected by the probe and further cause measurement errors of the sensors. The concept of using electronic technology to offset machinery precision deficiency is utilized. A new method of electronic rectifying is proposed. The automatic gain control (AGC) technology used in the field of wireless communication is applied for sensor signal processing. An AGC circuit consisting of a multiplier and divider AD534 is designed. A new smart time grating displacement sensor currently under development by us is used to provide experimental results for comparison with and without the AGC technology.