This paper has proposed a novel fiber Bragg grating (FBG) displacement sensor with a sub-micrometer resolution through the use of the transverse property of a suspended optical fiber with a pre-tension force. A wedge-shaped sliding block and a T-shaped cantilever beam formed a conversion mechanism to transfer the horizontal measured-displacement into the transverse movement of the optical fiber midpoint. Compared with existing FBG displacement sensors, this design does not only avoid the FBG-pasting process and its associated issues such as, the chirping failure and low repeatability, but also achieves a high resolution. The sensing principle has been presented, and the corresponding theoretical model has been derived and validated. Experiments show that this design has an excellent sensitivity of 2086.27 pm/mm and a high resolution of 0.48 μm within a range of 1.0~2.0 mm. The displacement results from the proposed sensor closely agree with the values detected from the commercial laser displacement sensor, validating its effectiveness. Therefore, the proposed sensor can be directly utilized to measure the sub-micrometer displacement, and also support multi-point distributed detection.