The inverse finite element method (iFEM) is a mechanics-based algorithm for dynamic tracking of full-field structural displacements. Accurate deformed structural-shape can be attained without any material properties and loading information, even when some discrete locations lack in-situ strain measurements. The structure is discretized by inverse finite elements, enabling superior predictive capability for complex structural deformations. These exclusive advantages make iFEM suitable for geotechnical deformation monitoring, but very few researches and applications are present in the existing literature. With this in mind, a novel inclinometer that employs iFEM methodology as its underlying design theory is developed in this paper. The inclinometer is fabricated by lowering the fiber optic shape sensor into the conventional inclinometer casing leveraging on sliding fixtures. Distributed strain measures are captured using self-developed fiber Bragg grating sensors and then input into the iFEM model to regenerate the internal displacement of soil structures. The present inclinometer serves to both increase the survival rate of the sensors while at the same time achieving the sensing element reuse. A series of indoor and field validation tests have been performed and demonstrated the high accuracy, robustness, and practical usefulness of the iFEM-based inclinometer.