This paper presents the operating principle and signal processing needed for the design of a reliable solid-state accelerometer (SSA) coupled self-mixing (SM) interferometric laser displacement sensor for embedded applications. The influence of signal processing methods and accelerometer characteristics on the complete sensing system performance is studied, and four different SSA-SM sensing systems are examined and characterized. Through comparing their performance, the sensing system precision is limited by the noise density of the employed accelerometer as well as the used SM displacement retrieval technique, whereas the system bandwidth is mainly limited by the choice of a given accelerometer. Furthermore, this paper analyzes the phase and gain-matching properties that the SSA-SM should reach to guarantee proper extraneous vibrations correction. Finally, the proof of concept of a real-time SSA-SM sensing system indicating 30-dB correction is presented. This prototype demonstrates the possibility of using such a real-time sensing system for embedded and industrial applications in which the presence of extraneous movements would hinder traditional sensors use.