Water vapor existing inside internal end-face gaps of optical components of an optical fiber H2O sensing system makes it possible to influence the measurement accuracy and stability. The influence principle has been briefly analyzed based on the structure of three main optical components: a distributed feedback laser diode (DFB-LD), a collimator, and a photoelectric diode (PD). With application of a differential technique, the influence of water vapor inside the DFB-LD can be removed. With reasonable recombination of the collimator and the PD in a dual-beam detection system, the influence of water vapor inside the collimator and the PD's end-face gaps has been suppressed from more than 1.57×10(-3) to as low as -2.175×10(-5) in absorbance. After H2O isolation processing water vapor inside the end-face gaps of the DFB-LD, the collimator, and the PD can be utilized as a reference to design a simple but feasible H2O sensor. As a result, good linearity with an R2 of 0.9964 has been realized in a concentration range of 39-2110 ppm during an application test, and a long-term test of the designed H2O sensor against the S8000 with a difference of 10 ppm has been achieved.