This paper presents an inductive linear displacement sensor with bilateral sensing units, which consists of a stator with excitation coils, two movers with pickup coils and a mover base. Two movers have the same structure and work on two sides of the stator to realize bilateral sensing. Bilateral sensing units contribute to reducing the negative influence from the gap change between the movers and stator on the measurement performance of the sensor, because bilateral mover structure is able to maintain the sum of two side gaps constant and thus reach good magnetic coupling with the stator. Comparison experiments of the prototypes in different working gaps have been implemented and verified that the sensor with bilateral sensing units has better repeatability and accuracy than that with unilateral sensing unit. Based on the regular errors shown in the measurement results of the proposed bilateral sensing sensor in comparison experiments, this paper also presents the detailed analysis about the sources of some dominating error components. Accordingly, a sensor prototype with improved designs for reducing measurement errors was developed. Final experimental results of the improved sensor prototype show that the accuracy is better than 15μm and the repeatability is about 7μm with less than 1.2μm resolution in the range of 0mm~288mm.