A sensing system for a vehicle includes a sensor disposed at a vehicle and a control that includes a processor for processing sensor data captured by the sensor. A first polarizer is disposed in a light emitting path of at least one light source of the vehicle and a second polarizer is disposed in a light receiving path of the sensor. The second polarizer has an opposite-handed polarization configuration relative to the first polarizer. Some of the polarized light as polarized by the first polarizer impinges precipitation present in the field of sensing of the sensor and returns toward the sensor as refracted-reflected light. The second polarizer attenuates the refracted-reflected light and allows light reflected from objects present in the sensor's field of sensing to pass through to the sensor. The control, responsive to processing of captured sensor data, detects objects in the field of sensing of the sensor.