Underground displacement monitoring is an effective method to explore deep into rock and soil masses for execution of subsurface displacement measurements. It is not only an important means of geological hazards prediction and forecasting, but also a forefront, hot and sophisticated subject in current geological disaster monitoring. In previous research, the authors had designed a novel electromagnetic underground horizontal displacement sensor (called the H-type sensor) by combining basic electromagnetic induction principles with modern sensing techniques and established a mutual voltage measurement theoretical model called the Equation-based Equivalent Loop Approach (EELA). Based on that work, this paper presents an underground displacement inversion approach named "EELA forward modeling-approximate inversion method". Combining the EELA forward simulation approach with the approximate optimization inversion theory, it can deduce the underground horizontal displacement through parameter inversion of the H-type sensor. Comprehensive and comparative studies have been conducted between the experimentally measured and theoretically inversed values of horizontal displacement under counterpart conditions. The results show when the measured horizontal displacements are in the 0-100 mm range, the horizontal displacement inversion discrepancy is generally tested to be less than 3 mm under varied tilt angles and initial axial distances conditions, which indicates that our proposed parameter inversion method can predict underground horizontal displacement measurements effectively and robustly for the H-type sensor and the technique is applicable for practical geo-engineering applications.