The recently developed transmission-type extrinsic Fabry-Perot interferometric (TEFPI) optical fiber sensor can simply and effectively compensate for the difficult distinction of the measured direction of conventional EFPI optical fiber sensors. The TEFPI optical fiber sensor signal is composed of fringes and signal level variations, which correspond to the measured quantity and measured directions, respectively. In this paper, the signal processing, algorithm, the fringe tracking method, is presented for TEFPI optical fiber sensors with a signal that differs from conventional interferometric sensors. The algorithm is verified by application to simulated and experimental sensor signals from strain measurements. The algorithm successfully processed TEFPI optical fiber sensor signals by finding the correct positions of peaks, valleys and signal levels, and by calculating the exact measured quantity and directions.