Processing machines require various sensors for process monitoring and control to improve processing accuracy. Sensors become a critical factor in both automated production and intelligent manufacturing. It is interesting that the accuracy of the microdistance-measurement device affects the fine-tuning quality of cutting tools. In this work, we developed a noncontact microdistance sensor based on the giant magnetoresistance (GMR) effect by combining a neodymium magnet with a tool slider. The slider is displaceable along the axis of rotation adjustment. Thus, the distance between a neodymium magnet and GMR is altered when the rotary adjuster moves the tool slider. The corresponding voltage output can be measured under a changing magnetic field. The experimental results show that the measurement sensitivity can reach 4.68 mV/μm and that the linear output is approximately 2.54 V at the full-scale range. The significant advantage of being less prone to wear and not dampening the motion of a target of noncontact sensors leads to important applications in several areas of engineering and shows the potential for further improvement to provide a suitable structure for practical applications.