A new, to the best of our knowledge, distributed optical fiber vibration and temperature hybrid sensing system is proposed and experimentally demonstrated. The proposed system only employs two signal channels, which is more compact and practical. Based on the structure of the optical time domain reflectometer (OTDR), the Rayleigh scattering light and the Raman anti-Stokes scattering light is extracted for vibration and temperature sensing, respectively. For vibration sensing, a new differential location algorithm based on polarization state analysis of the Rayleigh scattering light is proposed to locate the vibration events. It first rectifies the original OTDR traces by fiber attenuation compensation to make each position in it with the same pulse power level. And then, by difference of adjacent traces and threshold discrimination, the vibration positions are identified and located. For temperature sensing, a temperature calibration unit and algorithm are adopted to dynamically correct the trace data and reduce the temperature measurement error caused by the instability of the pulse laser source. The experiment is conducted with a fiber range of about 12 km and laser pulse width of 60 ns, and the experimental results show that the maximum error range for temperature measurement is −0.7∘C to 1.3°C, with a root mean square (RMS) error of 0.85°C in the entire temperature measurement range. Additionally, the spatial resolution (SR) for both vibration and temperature sensing is 6 m.