Abstract: Oil storage tanks are important equipments for storage of flammable, explosive fuel oils, and widely used in petroleum, chemical, transportation, storage and transportation industries. The monitoring of the liquid level in the oil tanks is required during the production, management and safety control for the enterprises. For the requirements of storage, transportation and safety monitoring of light oils, a fiber optic sensing technique for monitoring oil-water interface is proposed. Because there is a refractive index difference between oil and water, when the endface of an optic fiber approaches the surfaces of oil layer or wtaer layer, the reflected light intensity of the optic fiber endface at the air-oil interface and oil-water interface will vary and can be detected. Therefore, the levels of the oil or water can be detemined. The measurement accuracy can reach millimeter level.