The operation of a fiber Bragg grating strain sensor system that uses interferometric determination of strain-induced wavelength shifts and incorporates a reference channel to compensate for random thermal-induced drift in the output is described. This system is shown to be capable of resolving sub-microstrain changes in the quasi-static strain applied to a grating and has a resolution of ~6 x 10(-3) microstrain/ radicalHz at a strain perturbation frequency of 1 Hz.