The use of rotor-mounted sensors and actuators in active vibration control of rotating machinery has the potential to overcome certain limitations of conventional stator-mounted components. A test system has been constructed to evaluate internal sensing and actuation strategies, where components are mounted within a hollow-shaft rotor. MEMS accelerometers are used to measure the vibration-induced acceleration of the rotor centre in the rotating frame of reference. With appropriate calibration and processing, this data can be used as a substitute for rotor displacement measurements. The results presented show how measurement accuracy tends to increase with rotational speed. As the accelerometers are located within the rotating reference frame, identification of the magnitude and phase of the rotor unbalance can be performed directly without the need for correlating fixed frame measurements with timing marks. Experimental results for sub-critical operation of the test system and comparison with theoretical predictions show the effectiveness of the system.