A serial communication interface is designed for an eddy current displacement sensor, which consists of a probe, an oscillating drive circuit, and an RMS-to-DC converter. The experimental results show that the output voltage of the eddy current displacement sensor is 0~5V, the resolution is FS±0.25%, and the maximum linearity error is ±0.6%. In addition, user interfaces for digital signals and serial communication output signals are also built so that users can set the communication parameters to be integrated with industrial automation equipments or to be used by automated production line. The main advantages for the eddy current displacement sensor designed and developed in this paper include low energy consumption, low price, reconfigurable format, friendly interface, customized installation and easy assembly. Also, the serial communication design meets the requirements of flexible production process, production monitoring, and remote malfunction diagnosis, etc. It is applicable to all commercial machine tools or industrial machinery family.