Ultrasonic techniques have been widely used to determine the volume fractions of liquid components in oil–water two-phase flow. The two major ultrasonic interactions amenable to volume fraction estimation are the sound speed and attenuation. Instead of using these two linear ultrasound parameters, this study explores the use of ultrasound nonlinear parameter to measure the volume fraction of oil–water two-phase flow. Based on the theoretical modeling of ultrasound nonlinear propagation and nonlinearity measurement principle using finite amplitude insertion substitution (FAIS), we established a relationship between volume fraction and the amplitude of the second harmonic components in the received ultrasound waveform. With the use of high-intensity ultrasonic excitation, two-end calibration, and second harmonic amplitude extraction, the volume fraction of water can be calculated. The performance of the proposed method is validated by the numerical simulations and experimental studies in a lab-scale flow loop. Good qualitative agreement between the model and results shows that the nonlinear ultrasonic measurement technique has good quantitative accuracy and high measurement sensitivity, which make it well suited for industrial applications.