A novel fiber-optic magnetic field sensor is demonstrated based on a dual-polarization fiber-grating laser, which is embedded in an epoxy resin-bonded magnetostrictive composite material with doped Terfenol-D particles. A simple structure is designed to convert the magnetic field-induced strain to transversal stress, which is applied to the fiber laser to produce beat note frequency changes for measurement purposes. The response of the proposed sensor is measured, and shows quite a good directivity and linearity with a sensitivity of 10.5 Hz/μT to the magnetic field. It also shows a large measurable range up to about 0.3 T.