Refereed/Peer-reviewed Most fiber-optic torque sensors lack the accuracy to resolve small changes in torque when coupled with thick metal shafts in heavy industry. We present a new type of fiber-optic torque sensor based on the stress-optic effect with a high accuracy and a potentially wide dynamic-range. It is the first interferometric torque sensor based on the 3 x 3 coupler demodulation method, and being an all-fiber sensor head paves the way towards system-level immunity against electromagnetic interference. The optical fibers are located on the external surface of the shaft, which allows numerous possibilities for the internal design. We also studied the feasibility of three temperature-compensation schemes and two signal processing methods for different applications. For the dual-coil configuration, the instantaneous method yields a sensitivity, detection limit and response/recovery times of 6.9 mrad/(N.m), 0.79 N.m, >274 ms and >274 ms, respectively. The cumulative method produces 32.3 mrad/(N.m), 0.08 N.m, >95 s and >274 ms respectively. Torque up to similar to 50 N.m has been tested.