A fiber-optic Fabry–Perot (F–P) acoustic emission (AE) sensor system based on an improved double wavelength stabilization technique is described. Without stabilization, the sensor system drifts out of quadrature due to the presence of low-frequency dynamic strains. The stabilization is achieved by using a dense wavelength division multiplexer (DWDM) to generate two quadrature phase-shifted output signals. An optimum model of double wavelength stabilization is established. The filtering wavelengths of DWDM are calculated using an optimization design method. The performance of the developed sensor system was verified by two preliminary tests. One was a test on the stabilization of operating point of fiber-optic F–P sensor, and other was the detection of simulated AE signals generated by the impact and pencil lead breaking. The test results demonstrate that simulated AE signals are successfully detected using this stabilized sensor system, which solves the fade-out problem.