Fuel level sensor is a device to indicate the level of the fuel in fuel tank fitted in an automobile. This will have features to communicate the fuel level to the dashboard of the vehicle and is of significant attention to the driver during vehicle usage. The advanced instrumentation provides a lot of information on the dashboard display such as information about fuel level, computing mileage, miles to go or miles to empty, fuel economy, average mileage, etc. Presently, the float arm type with Thick Film Resistor(TFR) and Reed switch type fuel level sensors are being used. To have accurate information for computing, the present sensors are not supporting due to its limitations like nonlinearity, fluctuating output due to slosh, output variations in steps and not continuous.The measurement accuracy of the fuel level sensor needs to be focused to rely on the information available on the dashboard instrument. Hence, it is vital to have a sensor with better reliability, accuracy and adaptability.Capacitance technology based level sensor is identified for development as one of the solutions to meet the demands of the above requirements and this paper portrays the complete perspective and design methodology of capacitance based fuel level sensor. The basics of capacitance measurement, design concepts, design validations, proto-type results are elaborated in this paper.