We report a design of an optimized ring-type impedance sensor for water level measurements in air–water stratified flows through horizontal pipes. The ring-type sensor is optimized in view of the sensor linearity. In order to determine an optimal electrode and gap size of a ring-type sensor which generates a linear relationship between the impedance (resistance and/or reactance) and the water level, systematic numerical calculations are performed, and a ring-type impedance sensor of electrode width-to-diameter ratio 0.25 and gap-to-diameter ratio 0.2 has been selected as optimal. Lab-scale static experiments have been conducted to verify the sensor performance in terms of the linearity. Finally, this proposed sensor is installed in a horizontal loop 40 mm in diameter and roughly 5200 mm in length and measures water levels for various stratified flow conditions. The comparisons of water level measurements between the proposed sensor and the high-speed camera images post-processed by the edge detection scheme show that the maximum deviation in dimensionless water level is roughly 0.037, which corresponds to 1.5 mm over the range 40 mm.