An in-fiber Mach-Zehnder interferometer (MZI) is proposed and experimentally demonstrated for relative humidity (RH) and temperature measurements. The MZI is formed by a grapefruit-shaped photonic crystal fiber (G-PCF) cascaded with a short section of multimode fiber that serves as a mode coupler. To enhance sensitivity to humidity, femtosecond laser micromachining was performed to remove a portion of cladding of the G-PCF to expose its core to the ambient medium. The output interference spectrum is fast Fourier transformed to produce a spatial frequency spectrum that describes the intensity composition of the cladding modes in the MZI. In our investigation, it was observed that the interference dip intensity has a sensitivity of -0.077 dB/% RH to the change of RH in the range of 25%-80% RH, whereas the dip wavelength has a temperature sensitivity of ∼3.3 pm/°C in the range of 25°C-70°C. In addition, the dip intensity was insensitive to temperature. These characteristics have provided convenience in eliminating temperature cross talk and achieving accurate humidity measurement.