The invention discloses an incremental type small-measurement-range displacement sensor and a measurement method. The sensor comprises a laser beam, two reflection mirrors, a distributed type photoelectric detector and a processing system. With the adoption of the sensor, the laser beam is reflected continuously between one group of the two reflection mirrors which are arranged in parallel, and is finally illuminated to the distributed type photoelectric detector, so that the distance between the two reflection mirrors is changed, and a reflection path of the laser beam can be changed; a detection part I, a detection part II and a detection part III on the distributed type photoelectric detector are used for inducing the laser beam for three times, and the processing system is used for processing according to the number of times of receiving the laser beam by detection parts and the distance between the detection parts to obtain a detection value; the detection value is larger than a real change value of the distance between the two reflection mirrors; and the processing system can be used for calculating the real change value of the distance between the two reflection mirrors through the detection value. The sensor is simple in structure and is applicable to measurement of displacement changes of an object to be detected; and the sensor can be used for reliably measuring and has relatively high precision, and can be easily manufactured in a large batch.