This paper presents a technique for temperature cross-sensitivity compensation in liquid level sensor based on an in-fiber Mach-Zehnder interferometer. By using a commercial splicing machine and three different fibers, it is possible to construct a liquid level sensor with range of 120 mm and submillimeter resolution (0.88 mm). The sensor arrange is anchorage into a glass pipette, where the liquid level can be easily supervised. A broadband source is used to illuminate the sensor and the transmitted spectrum is monitored with an optical spectrum analyzer with 30 pm resolution. The interference pattern, created by the interferometer, is analyzed with either the traditional method of tracking peaks and dips or the overall spectrum envelope. These interferometers are sensitive to temperature variations, leading measurements errors on the liquid level estimation. Thus, an analysis of the temperature effect in the sensor response is performed. The result shows that the proposed technique reduces the sensor temperature cross-sensitivity by more than an order of magnitude. With traditional method (using peaks and dips), the value achieved was ~9.595 mm/°C, whereas the proposed approach based on the spectrum envelope leads to a temperature cross-sensitivity of about 0.562 mm/°C. The proposed sensor arrange is suitable for industrial applications such as chemical processing, fuel storage and transportation systems, oil tanks/reservoirs, and treatment plants, where there is simultaneous variations of temperature and level.