The small resistance of a resistive transducer generally linearly changes with a process variable, but their measurement by the usual resistive bridge circuit like the Classical Wheatstonebridge suffers from errors due to the nonlinearity,contact resistances, effect of the shunt resistance between bridge nodal points and the lumped resistances of leads connected to sensor as well as detector. In this paper, virtual instrument system for the measurement of small displacement using modified operational-amplifier-based dc Wheatstone bridge circuit with strain gauge as sensor has been proposed in which the effect of nonlinearity error and lead resistance is minimized. In this instrument, sensitivity and linearity have been improved in the absence of instrumentation amplifier. The output signal has been found to be linearly related with the displacement. This output voltage has been filtered and interfaced to PC-Lab VIEW through NI-cDAQ. The proposed system is easy to implement and convenient for various applications. In the first phase of the experiment, the bridge performance has been simulated using Lab VIEW and studied with a known variable resistor, and in the second phase, the same experimentation was done by replacing the strain gauge for the measurement of displacement. The linear characteristics over a wide range of displacement with good repeatability, linearity, improved and variable sensitivity have been described. © 2012 International Frequency Sensor Association (IFSA).