Railway systems are expected to be in their most safe state ensuring safe operations of trains. The contact between rail and wheel is one of the most fundamental aspects in railway systems. Therefore, instruments and measurement systems that give critical information about operating railway systems are expected to work efficiently and effectively. Previous research on using inductive displacement sensor for wheel flange wear measurement has focused on the light rail vehicles, and considered effect of temperature negligible, as opposed to mainline vehicle where the wheel temperature variation is large. Also, the filtering of noises has been done using non-real time data. This paper focuses on the real-time measurement system for freight vehicle wheel flange wear by fusing measurement data from inductive displacement and thermocouple sensors, and filtering of the noises. A CAD model of the sensor support fixed on the bogie frame is presented. Several experimental measurements are carried in the lab on a moving disk heated at different temperatures. Then multiple regression analysis of the data is carried out to come up with the measurement model equation. This equation is used for calibration in LabVIEW program interfaced with data acquisition system for real time measurement. Experimental results show effect of temperature on the inductive sensor measurement data. This effect is taken into account to quantify the clearance between the disk and the sensor tip. The precision and accuracy are determined to be 0.06 Volts and 0.03 mm, respectively. This system is expected to enhance the real-time and/or online monitoring of the safety of rail vehicles. Also, it can be integrated with Automatic Train Protection (ATP) and the detection of track lateral irregularities from the wheel flange real time measurement data.