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In this study, the design of a novel position sensor using finite-element analysis (FEA) based on the effect of local magnetic saturation has been discussed. This sensor is a position sensor, which enables distances to be measured with high resolution. The operating principle provides a high-precision linear output signal along with cheap production costs. The main aim of the presented work is to design a feasible finite-element model of the sensor, which is precise enough to represent the physical properties and effects, so that there is no need to build up new prototypes for every step of an optimisation or development. The construction of the sensor is simple but the challenge is the meshing of the sensor element and the transmitter, represented by a permanent magnet, because of the differences in the geometric dimensions. The assembly of the sensor was done by the company Micro-Epsilon. The simulation results of the designed finite-element model were checked against the measurements of the prototype. This comparison between simulation results and measurements showed that the attempt to design a finite-element model was successful with deviations lying only in between 3 and 5%.