In this letter, a new method for liquid level measurement based on in-line Mach Zehnder interferometer (MZI) in fiber ring laser cavity is proposed and experimentally demonstrated. Two cascaded peanut-shaped fiber structures are designed to implement MZI with a length of 25 mm. At the beginning, the broadband light source was used to demonstrate the possibility of MZI as a liquid level sensor. The experimental results show that the liquid level sensitivity of -1.057 nm/cm can be achieved in the detection range of 0-20 mm. However, using broadband light sources to build a sensing system has a large 3-dB spectral bandwidth and low signal-to-noise ratio in the available wavelength range. Therefore, these sensing systems may have poor resolution, low accuracy monitoring and limited detection distance. Therefore, the experiment further uses the fiber ring laser (FRL) cavity to replace the broadband light source to realize the liquid level monitoring. Thanks to narrow laser linewidth and high signal-to-noise ratio, higher detection accuracy can be obtained. MZI acts as a filter and a sensor at the same time. When the liquid level changes, the interference peak shift plays the role of filtering and wavelength selection. The results showed that the detection sensitivity was as high as -1.348 nm/cm. Accompanied by a signal-to-noise ratio of up to 50 dB and a 3-dB linewidth of less than 0.2 nm. Besides, the fiber ring laser cavity can theoretically extend the length of single-mode fiber infinitely in the cavity. Hence, the sensor designed is exemplary and representative for liquid level monitoring in unconventional areas in the far field such as: extreme geological landforms, high temperature and high-pressure regions and anaerobic areas.