This paper describes the design of a highly accurate proximity sensing system that is capable of operating in a wide distance range. The system is based on passive inductive proximity sensors that can withstand harsh environments, and, therefore, are widely used in avionic applications. Our design methodology consists of determining the ideal trade-off between the sensor excitation method and the computational complexity of processing the response. Once the method is chosen, we create a FPGA design for sensor characterization. Finally, we create the deployment design that uses the characterization data to determine the distance between the passive sensor and the metallic target. Our experimental results show that we are able to measure distances in the range of 0 – 5 mm at 0.1 mm resolution with high accuracy using off-the-shelf passive sensors and FPGA. This is a major improvement over comparable proximity sensing technologies currently available for avionic applications.