A system for detecting and discriminating between water and ice formation on a number of objects, such as aircraft or roadways is described. The system includes an optical element or sensor adapted to receive at least first and second wavelengths of light from a multi-wavelength light source and for outputting attenuated versions of the first and second wavelengths of light. A detector senses and converts the attenuated versions of the first and second wavelengths of light to electrical signals proportional to the light intensities of the first and second wavelengths of light. A processor is coupled to receive and process the electrical signals for determining one or more light intensity values and for actuating one or more indicators corresponding to one of a number of predetermined states of operation of the optical element, including a normal state of operation, a rain state of operation and/or an ice state of operation.