A novel method of enhancing the signal level of extrinsic fiber-optic Fabry-Perot interferometer (EFPI) is proposed and demonstrated. This method is based on the simultaneous use of the amplified spontaneous emission (ASE) and optical amplification of an erbium-doped fiber (EDF) pumped by a 980 nm laser diode. The improvement in interferometric signal level is very significant as an enhancement of 4 orders of magnitude can be achieved. An experiment is carried out to verify this concept. An improvement of 43 dB in signal level has been achieved with a small pump power of ～30 mW. The strain accuracy has been improved by a factor of two compared with authors' previous EFPI system without optical amplification. Such an EFPI system has a good performance-to-price ratio since it can enhance the optical intensity greatly while it doesn't increase the cost of the sensor system significantly.