Surface plasmon resonance (SPR) has found extensive applications in chemi-sensors and biosensors. Plasmons play different roles in different types of optical sensors. SPR transduces a signal in a colorimetric sensor through shifts in the spectral position and intensity in response to external stimuli. SPR can also concentrate the incident electromagnetic field in a nanostructure, modulating fluorescence emission and enabling plasmon-enhanced fluorescence to be used for ultrasensitive detection. Furthermore, plasmons have been extensively used for amplifying a Raman signal in a surface-enhanced Raman scattering sensor. This paper presents a review of recent research progress in plasmon-enhanced optical sensing, giving emphasis on the physical basis of plasmon-enhanced sensors and how these principles guide the design of sensors. In particular, this paper discusses the design strategies for nanomaterials and nanostructures to plasmonically enhance optical sensing signals, also highlighting the applications of plasmon-enhanced optical sensors in healthcare, homeland security, food safety and environmental monitoring.