An on-chip system is presented with integrated architectures for digital microfluidic actuation and sensing. Localized actuation is brought about by a digital microfluidic multiplexer layout that overcomes the challenges of multi-microdrop interference, and complete two-dimensional motion is shown for microdrops on a grid with minimized complexity by way of inputs. At the same time, microdrop sensing is demonstrated in a folded-cavity design for enhanced optical intensity probing of internal fluid refractive indices. The heightened intensities from this on-chip refractometer are shown to have a linear response to the underlying fluid refractive index. An electro-dispensing technique is used to fabricate the folded-cavity optical architecture in a format that is tuned for the desired refractive index range and sensitivity. The overall lab-on-a-chip system is successful in integrating localized microdrop actuation and sensing.