In this work, the digital matched filtering (DMF), a signal processing technique, has been proposed to identify the multiple peak wavelengths, more accurately from reflection spectra of etched few-mode fibre Bragg grating (FM-FBG) sensor. The etched FM-FBG has been fabricated and its intrinsic property of having different sensitivities for different reflection peaks in spectrum has been used for sensing the multiple parameters, such as temperature and refractive index of the ambient environment. The experimental characterization of the fabricated etched FM-FBG sensor has been carried out by using six samples of standard sodium chloride (NaCl(aq)) solutions with refractive indices (RIs) ranging from 1.3159 to 1.3375 at 24 °C temperature. The reflection spectra have been acquired for each sample by varying the temperature from 24 °C to 80 °C. The temperature and RI sensitivities have been investigated from the acquired spectra by using digital matched filter (DMF). The obtained sensor results have been compared with conventional peak detection (CPD) method results for the same spectra. It has been observed that the results obtained by DMF technique are closer to the reference sensor values and has shown more accuracy than the results obtained by CPD technique. It has been shown that the DMF has better performance in terms of the accuracy of measured results than that of CPD. In addition, to eliminate the effect of cross sensitivity issue of the sensor, the 3×3 order characteristic matrix has been used. Hence, the etched FM-FBG can be used as multi-parameter measurements with better performance using DMF technique. Index Terms-Fibre Bragg gratings (FBGs), optical fibre sensors, Digital matched filtering signal processing technique.