The separation arrangement of magnetorheological damper (MRD) and sensor in the vehicle semi-active suspension system will result in large installation space, low system reliability and high maintenance cost, especially the external environment interference for the sensor signal. Aiming at these shortcomings, an improved displacement differential self-induced magnetorheological damper (DDSMRD) was developed. There were two layer copper coils wounded on the damper piston head, one was the inner coil, the other was the outer coil. The inner coil can be acted as damping excitation coil, which can control the damping force by adjusting the applied current. The outer coil can be acted as the induced coil, which can generate an induction signal. When the outer coil was input the high frequency AC excitation signal, the self-induced coils wounded on the winding cylinder can generate the displacement signal with the same frequency. Thus, the displacement differential self-induced voltages can be obtained. The mathematical model of the relationship between the self-induced voltage and the damper displacement was derived. A static test rig was built to analyze the self-induced ability, and the results showed that the selfinduced voltage was linear to the piston displacement under static tension. Through the dynamic tests, an amplitude voltage of 0.3V, 0.6V and 0.9V was obtained under the piston displacement of 5mm, 10mm and 15mm, respectively, which also showed a good linearity. When the inner coil was applied 1A current, the proposed damper can generate 360N damping force.