A novel magneto-optical current sensor (MOCS) with two sensing arms is proposed to improve the temperature stability. One of the arms, with a highly stable permanent magnet attached and orthogonal to the other one, is designed to provide a reference that follows the temperature characteristics of the sensing material. By a normalization operation between two arms, the temperature drift is compensated adaptively and a sensing output proportional to the measured current can be reached. A dual-input and dual-output structure is specially designed for the reference sensing arm to demodulate the DC Faraday rotation angle. This scheme compensates simultaneously two main temperature influence factors, the Verdet constant and linear birefringence. Validation tests were carried out and are discussed.