A position sensor system capable of self compensation over wide temperature ranges, air gaps and tilts. Three matched MRs are aligned in the direction of movement of a magnetic target. The middle MR is the position sensor, and the two outer MRs serve as reference sensors which sense the magnetic field at the limits of the position sensing range. The cooperating magnetic target assures that one of the two outer MR elements is always exposed to some maximum magnetic field, BMAX, corresponding to a position XMAX, and the other MR element is always exposed to some minimum magnetic field, BMIN, corresponding to a position XMIN, such that BMIN≦BX≦BMAX, corresponding to XMIN≦X≦XMAX, where BX is the magnetic field measured by the middle MR and varies with the position, X, of the target. The actual position, X, is computed assuming a linear relation between MR resistance in the magnetic field range from BMIN to BMAX and the position, X, of the target. This is accomplished by making the magnetic field a linear function of position in the range XMIN to XMAX and using MRs whose resistance is a linear function of magnetic field in the range BMIN to BMAX.