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The paper analyzes the performance of a dual-wavelength technique devised to compensate power fluctuations in intensity-modulated plastic optical fiber sensors, which were specifically conceived for the measurement of displacements in industrial and civil applications. These sensors retrieve the displacement from the variation of the attenuation along the light path and use two signals at different wavelengths to compensate for the effects of parasitic quantities, such as temperature and strains along the fiber. The theoretical behavior of the compensation technique is presented, and the results of experiments carried out with different combinations of signal wavelengths and plastic fibers are reported. The experimental setup has proved that, by proper choice of the compensation signal wavelength, it is possible to monitor displacements in the range (0 to 10) mm, even for low received power and under severe perturbation conditions, thus significantly improving the long-term stability of the sensors.