This paper presents a condensed study on a capacitance-based water holdup detection method and the design of a miniature sensor for oil–water two-phase flow. The work is motivated by the need for accurate online monitoring of crude-oil water holdup in highly deviated and horizontal wells, where conventional single-point capacitive sensors suffer from limited structural adaptability and serious stray-capacitance interference. Starting from the physical chain of water holdup, dielectric constant, and capacitance, a probe-type capacitive sensor is developed and integrated with a digitization circuit. The sensor capacitance is converted directly into oscillation frequency by a multivibrator based on a Schmitt inverter, which suppresses the adverse influence of long lead wires and improves the anti-interference capability of the measurement channel. To reduce external wiring, a current-detection conversion circuit is further designed to recover the frequency information from the supply current, thereby enabling power-signal multiplexing. Experimental results obtained at 25 °C over a water-holdup range of 0%–100% show a monotonic frequency response, with particularly good resolution below 50% water holdup. In the low-water-holdup range, the maximum relative error is 3.5% and the maximum absolute error is 2.7%. The proposed sensor therefore provides a compact and practical solution for array-based downhole water holdup measurement.