Active magnetic bearing (AMB) systems support rotating shafts without any physical contact, using electromagnetic forces. Each radial AMB uses two pairs of electromagnets at opposite sides of the rotor. This allows the rotor to float in the air gap, and the machine to operate without frictional losses. In active magnetic suspension, displacement sensors are necessary to detect the radial and axial movement of the suspended object. In a high-speed rotating machine equipped with an AMB, the rotor bending modes may be limited to the operating range. The natural frequencies of the rotor can cause instability. Thus, notch filters are a useful circuit for stabilizing the system. In addition, commercial displacement sensors are sometimes not suitable for AMB design, and cannot filter the noise caused by the natural frequencies of rotor. Hence, implementing displacement sensors based on the AMB structure is necessary to eliminate noises caused by natural frequency disturbances. The displacement sensor must be highly sensitive in the desired working range, and also exhibit a low interference noise, high stability, and low cost. In this study, we used the differential inductive sensor head and lock-in amplifier for synchronous demodulation. In addition, an active low-pass filter and a notch filter were used to eliminate disturbances, which caused by natural frequencies. As a consequence, the inductive displacement sensor achieved satisfactory linearity, high sensitivity, and disturbance elimination. This sensor can be easily produced for AMB applications. A prototype of these displacement sensors was built and tested.