A magnetic field sensor with enhanced immunity to external magnetic interference is presented. Included is a magnetic field signal generator and a demodulator. The magnetic field signal generator produces a magnetic field signal having a modulated signal portion in a first frequency band based on a sensed modulated AC bias magnetic field. The modulated AC bias magnetic field is produced by movement of ferromagnetic target relative to a bias coil when an AC signal is applied to the bias coil. When the magnetic field signal also includes an unwanted signal portion in a second frequency band based on external magnetic interference, demodulation performed by the demodulator results in the modulated signal portion being shifted from the first frequency band to a third frequency band and the unwanted signal portion being shifted to the first frequency band. The bias coil may be provided as part of the magnetic field sensor.