A novel active fiber cavity ringdown (FCRD) technique using frequency-shifted interferometry (FSI) is proposed for the first time. Using this scheme, external parameters can be monitored in the space domain by measuring the ringdown distance instead of ringdown time. A bidirectional erbium-doped fiber amplifier (Bi-EDFA) is employed to compensate the inherent cavity loss for achieving higher sensitivity. And two band-pass filters are used to reduce the amplified spontaneous emission (ASE) noise of the Bi-EDFA. Compared with the well-known time-domain active FCRD scheme, our proposed method enables us to avoid using pulsed laser needed in time-domain active FCRD, it uses continuous-wave laser to inject into the fiber cavity and stabilize the optical power in the fiber cavity, which can suppress gain fluctuations of the EDFA and thus improve the detecting precision. Moreover, this novel method enables us to use differential detection method for further reducing the ASE noise, and thus eliminating the baseline drift of ringdown signal. A magnetic field sensor was developed as a proof-of-concept demonstration. The experimental results demonstrate that the proposed sensor with a sensitivity of 0.01537 (1/km·Gs) was achieved. This is the highest magnetic field sensitivity compared to the time-domain active FLRD method. Due to the reduced ASE noise, the stability of the proposed sensing system was also greatly improved.