A time-domain ranging algorithm is proposed for a frequency-modulated continuous wave (FMCW) short-range radar sensor with high accuracy and low complexity. The proposed algorithm estimates the distance by calculating the ratio of the beat frequency signal to its derivative and thereby eliminates the restriction of frequency bandwidth on ranging accuracy. Meanwhile, we provide error analysis of the proposed algorithm under different distances, integral lengths, relative velocities, and signal-to-noise ratios (SNRs). Finally, we fabricate FMCW sensor prototype and construct a measurement system. Testing results demonstrate that the proposed time-domain algorithm could achieve range error within 0.8 m. Compared with the conventional fast Fourier transform (FFT) estimation scheme, the proposed method performs ranging without the requirement of complex multiplications, which makes it reasonable to be implemented in real-time and low-cost systems.