In view of the application defects for common hydraulic cylinder displacement sensor in the high integration, small volume environment, the design of signal conditioning circuit for highly integrated hydraulic cylinder displacement sensor was carried out. Based on the analysis of the displacement sensors original signal characteristics, the circuit of DC isolation, amplifying, power conversion and filter circuit was developed in order to obtain highquality displacement detection signal. Multisim and Proteus were adopted to verify the circuits effectiveness by simulation work. The results show that the signal conditioning circuit can turn displacement sensors original signal into standard harmonic signal. The turn is conducive to signal subdivision and therefore improves the detection precision of hydraulic cylinder displacement.