The accurate measurement of volume fraction of oil-water two-phase flow on line is important in the oil field. This paper presents a new coaxial conductivity sensor for measuring the volume fraction of oil-water two-phase flow. This structure may get the more uniform sensitivity field and the vertical installation may get the more axial symmetry of the flow field, which improve the measurement accuracy. In order to minimize the influence of the edge effect, guard electrodes were designed. An anti-edge effect degree Ae was defined to optimize the length of the guard electrode. Different models of effective conductivity of two materials were used in calculating the oil volume fraction of oil-water two-phase flow. The experimental results indicate that Maxwell model is the best model under the condition of oil volume fraction less than 50% and the mean value of the calculation results using Maxwell model and Bruggeman model possesses higher accuracy in the range of oil volume fraction (50%-70%). The experimental results show that the sensor obtains similar measurement performance in both vertical upward and downward flow conditions. The accuracy of the sensor system is 2% when the oil volume fraction less than 50%, and the accuracy is about 5% when the oil volume fraction between 50% and 70%.