Pulse oximeter has been a widely used instrument in hospitals or household for measuring arterial oxygen saturation value. Its annual global market value has exceeded USD 1 billion and is still growing. There are two main shortcomings in most pulse oximeters on the market: 1. database based algorithm limits the range of precision, and 2. incapable of measuring tissue oxygen saturation related to local tissue oxygen exchange condition. We developed a 3-wavelength frequency multiplexed intensity modulated diffuse reflectance system in which the modulation frequencies of the 3 light sources are different so that the light reflectance at the 3 wavelengths can be collected by the detector simultaneously. This allows us achieving determination of absorption and reduced scattering coefficients at the 3 wavelengths of the exactly same instant of time and this can lead to accurate quantification of tissue and arterial oxygen saturations. This technique works in conjunction with a photon diffusion equation and does not need to build a database in advance to calculate arterial oxygen saturation. In addition, capability of this system in measuring tissue oxygen saturation would facilitate swift monitoring of local tissue blood circulation.