Rotor-stator axial clearance is a crucial design parameter affecting rotating machines' efficiency and safety. To accurately measure the dynamic axial clearance in high-speed machinery, a precise method based on time division multiplexing with frequency domain interferometry has been proposed. This method has proven robust and accurate through simulations and experiments. The inclusion of an optical switch enables the utilization of dispersive interferometry(DPI) and time division multiplexing for multiple channels of the light source. It achieves a static accuracy of 1.5 µm for a 15 mm range and a dynamic accuracy of 9 µm at 3000 rpm.