To aid in the design of new sensors the methodology of determining the optimum sensitivity, linearity, and dynamic range requirements of underwater acoustic sensors is described. The relationships between the commonly specified ‘‘rated’’ sensitivity and its ‘‘absolute’’ detectability are explored in terms of the required minimum and maximum detectable signal levels and background noise in the operating environment and signal conditioning equipment. Performance limitations of fiber-optic and electroacoustic sensor designs and cost tradeoffs between the sensor and signal conditioning equipment are compared.