A distributed sensor system including an optical source (100) having a short coherence length for optionally continuously monitoring each sensor in the system. In one preferred embodiment, an array of fiber-optic sensors (110) are organized in a ladder configuration, with the sensors positioned in spaced relation and defining the rungs of the ladder. Light transmitted through the sensors is multiplexed onto a return arm (114) of the ladder, with sensor spacing being such that interference between light from different sensors is prevented. The multiplexed signals are received by an optical fiber receiver (118, 120) which couples the mutiplexed light with an interfering optical reference signal to produce a phase difference signal representing conditions influencing selected sensors. Embodiments are disclosed for use of either pulsed or continuous wave light sources. In another preferred embodiment, the sensors comprise a plurality of interferometers (404,406) connected in series configuration by a common optical fiber (402), which provides multiplexed output signals from the sensors to another plurality of interferometers (418, 420) comprising receivers. Functional equivalents of the series configuration provide sensors and receivers comprising birefringent or two-mode fiber. The optical path length differences between each pair of sensor arms (409, 410, 411 and 412) are selected to prevent interference between the multiplexed sensor output signals from the various sensors. The optical path lengths through the sensors (404, 406) and receivers (418, 420) are structured so that each receiver (418, 420) produces a phase difference signal relating to conditions affecting light transmission through a specific sensor (404, 406). A phase and amplitude modulation technique is disclosed for providing heterodyned output signals from the dristributed sensor system.