A spin accumulation sensor having a three terminal design that allows the free layer to be located at the air bearing surface. A non-magnetic conductive spin transport layer extends from a free layer structure (located at the ABS) to a reference layer structure removed from the ABS. The sensor includes a current or voltage source for applying a current across a reference layer structure. The current or voltage source has a lead that is connected with the non-magnetic spin transport layer and also to electric ground. Circuitry for measuring a signal voltage measures a voltage between a shield that is electrically connected with the free layer structure and the ground. The free layer structure can include a spin diffusion layer that ensures that all spin current is completely dissipated before reaching the lead to the voltage source, thereby preventing shunting of the spin current to the voltage source.