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A directional coupler, consisting of two coaxial dielectric waveguides, has been studied as a possible fiber-optic sensor. The dependence of the power distribution between the guides as a functinn of the outer cladding index is considered for monochromatic illumination. The additional advantages of using wavelength modulation as opposed to intensity modulation are discussed, and the fiber design procedure is given in detail. Preliminary experimental results are presented for both systems, broadly consistent with theory but showing limitations caused by fabrication problems. The requirements for developing a practical device are considered.