The proposed paper discusses about a sensing technique for measurement of the liquid level. The objective of the proposed technique is it should be able to measure the liquid level even with impurities added to it. Usually, a measurement technique is designed and calibrated to particular conditions. In case of the liquid level measurement, the constraints would be type of liquid, temperature of liquid, and so on. This paper concentrates on designing a system which when used along with the traditional signal conversion circuit should be able to produce output, which would be accurate even when some impurities are added to the liquid. The designed system consists of an observer in the form of Kalman filter which would estimate the disturbance parameter, and suppress its effect from the measured signal. The designed technique is implemented and tested using the practical system. Results show successful implementation of the proposed technique.