Pipeline monitoring is an important task for the economic and safe operation of pipelines as well as for loss prevention and environmental protection. The circumferential strain is of significance in pipeline integrity monitoring. In this paper, an indirect pipeline corrosion monitoring method based on the circumferential strain measurement is firstly proposed, with main objectives at designing a circumferential strain measuring device. Combined with unique advantages of optical fiber sensing, an FBG hoop-strain sensor was designed and encapsulated. Its enhanced sensitivity mechanism in the circumferential strain measurement and manufacturing technique is detailed. The experimental study of the developed FBG hoop-strain sensor is conducted on a PVC model pipeline to investigate its characteristics, including reliability and some tentative dynamic tests. Results of model tests show that the FBG hoop-strain sensor demonstrates good performance in the circumferential strain measurement, and can be considered as a practical device for pipeline health monitoring.