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A spectrally-overlapped chirped fibre Bragg grating (FBG) sensor system for simultaneous two-parameter sensing is presented. The chirped FBGs are amplitude-modulated in such a way that they can be spectrally overlapped with similar spectral characteristics, namely the centre Bragg wavelength and bandwidth. That is, the chirped FBGs are multiplexed via the spectral-overlap multiplexing scheme. Because of its compatibility with the wavelength division multiplexing scheme, the number of gratings to be multiplexed can be increased by several times. The multiplexed sensor signal is demultiplexed and demodulated using the discrete wavelet transform. The resolution, accuracy and crosstalk of the sensor system are investigated through strain measurements. The application of this sensor system is demonstrated through the simultaneous measurement of strain and temperature of a metal alloy plate. © 2007 IOP Publishing Ltd.