Polarization sensitivity is an important factor that affects the interrogation of ultrasmall arrayed waveguide grating (AWG) for fiber Bragg grating (FBG) sensor. An ultrasmall 1 × 8 silicon-on-insulator (SoI) AWG with a core size of less than 530 μm × 480 μm is proposed in this study. This ultrasmall SoI AWG exhibits good transmission spectra and high polarization sensitivity. The increased channel numbers and tight structure increase the polarization sensitivity of AWG. Temperature interrogation experiments show that the FBG sensor interrogation is drastically affected when the effect of polarization sensitivity on the ultrasmall AWG is sufficiently large.