We propose and demonstrate a 0.5 mm resolution distributed fiber temperature and strain sensor with position-deviation compensation based on the Optical Frequency Domain Reflectometry. The position-deviation compensation helps maintain the cross-correlation of the Rayleigh spectra, which degenerates at the higher resolution. Experimental results reveal a 0.5 mm strained fiber segment recognized at the end of a 25 m fiber, with 50,000 equivalent measuring points. The temperature repeatability of ± 0.9 °C (12.5 pm) is obtained from 50 °C to 500 °C with an 18 m gold-coated fiber, and the strain accuracy of ± 15 µɛ is also achieved within ± 2500 µɛ using a polyimide coated fiber. The small-scale, high spatial-resolution, and electromagnetic-immune distributed optical fiber sensors can be applied to address the test challenges in astronautics, advanced materials, and nuclear facilities, where high temperature, large strain change, space radiation, and complex electromagnetics presents.