This paper describes a three-layer head phantom with artificial pulsating arteries at five different depths (1.2 mm, 3.7 mm, 6.8 mm, 9.6 mm and 11.8 mm). The structure enables formation of spatially and temporally varying tissue properties similar to those of living tissues. In our experiment, pressure pulses were generated in the arteries by an electronically controlled pump. The physical and optical parameters of the layers and the liquid in the artificial arteries were similar to those of real tissues and blood. The amplitude of the pulsating component of the light returning from the phantom tissues was measured at each artery depth mentioned above. The build-up of the in-house-developed pulse oximeter used for performing the measurements and the physical layout of the measuring head are described. The radiant flux generated by the LED on the measuring head was measured to be 1.8 mW at 910 nm. The backscattered radiant flux was measured, and found to be 0.46 nW (0.26 ppm), 0.55 nW (0.31 ppm), and 0.18 nW (0.10 ppm) for the 1.2 mm, 3.7 mm and 6.8 mm arteries, respectively. In the case of the 9.6 mm and 11.8 mm arteries, useful measurement data were not obtained owing to weak signals. We simulated the phantom with the arteries at the above-mentioned five depths and at two additional ones (2.5 mm and 5.3 mm in depth) using the Monte Carlo method. The measurement results were verified by the simulation results. We concluded that in case of 11 mm source-detector separation the arteries at a depth of about 2.5 mm generate the strongest pulse oximeter signal level in a tissue system comprising three layers of thicknesses: 1.5 mm (skin), 5.0 mm (skull), and > 50 mm (brain).