This article develops a new inductive displacement sensor with a segmented multi-group coil structure, which is suitable for the displacement measurement of control rods in nuclear reactors. Each group coil of the sensor consists of two excitation coils and one sensing coil. The excitation and sensing coils are segmented to extend the linearity range of the displacement sensor. It abandons the traditional sensor’s method of using nonlinear compensation to achieve large-stroke displacement measurement. Providing an alternating current (AC) signal to the excitation coil and processing the induced voltage generated by each sensing coil can directly achieve the high-precision measurement of core displacement. The mathematical model of the variations in the sensing coil voltage caused by the movement of the core is established. The impacts of the excitation coil structure, the number of turns of the excitation coil, and the excitation frequency on the output characteristics of the designed sensor are analyzed by finite element simulation. Based on the analysis and design, a sensor prototype is built and tested in the laboratory. The measurement results show that the linearity error is 0.35% and the maximum measuring error can be limited within 1.5 mm, which is sufficient to meet the practical requirements in a nuclear reactor environment.