This paper describes a smart sensor for rotational speed measurements, consisting of a magnetoresistive sensor, the signals from which are processed by a new generation of signal conditioning electronics. The system is specialized for ABS applications with its harsh automotive environmental conditions. Data is provided using three levels via its two-wire current interface. The mixed-signal approach of the electronics allows transmission of a digital protocol, direction recognition, determination of an “air gap measure”, large air gap due to dynamic signal conditioning with several feed-back loops and true power-on with zero-speed behavior. Limitations of the former sensor generation are explained and it is shown how these are overcome by the new electronics.