In this paper, a compact in‐fiber integrated micro‐displacement sensor, based on a two‐core fiber in a loop configuration, is outlined. It consists of a segment of two‐core fiber fused with standard single‐mode fiber, and a dielectric mirror directly deposited on the end face of the two‐core fiber. Then, when the two‐core fiber is directly powered by an optical source through a 3dB coupler, the reflected signals from the mirrored end of the two‐core fiber are combined in the fused zone and received by a photo detector. In this way, a practical Michelson interferometer can be implemented. The basic idea behind our approach is to use the optical path change induced in the two‐core fiber loop, where the axis joining the cores is parallel to the loop plane, when the loop is deformed and leading differential phase retardation between the two cores. We have found that the behavior of the sensor is linear and its sensitivity can be adjusted.