Measuring water holdup and characterizing the flow behavior of an oil–water two-phase flow is a contemporary and challenging problem of significant importance in industry. To address this problem, we develop a new method to design a new four-sector distributed conductance sensor. Specifically, we first use the finite-element method (FEM) to investigate the sensitivity distribution of the electric field and then calculate its response on the measurement electrodes. Based on the FEM analysis results, we extract two optimizing indexes to describe and find the optimum geometry for the four-sector distributed conductance sensor. We carry out oil–water two-phase flow experiments in a vertical upward pipe to validate the designed sensor implemented in the measurement of water holdup. In addition, we use the multivariate pseudo Wigner distribution (MPWD) method to analyze the multivariate signals from the four-sector distributed sensor. Our analytical and experimental results indicate that the four-sector distributed conductance sensor enables measuring water holdup and the MPWD allows uncovering local flow behavior revealing different oil–water flow patterns.