We present here the design of a sensitive compact Faraday-modulator (CFM) based optical magnetometer for imaging the distribution of weak local magnetic fields inside hysteretic magnetic materials. The system developed has a root-mean-square noise level of 50 mGHz-1/2 at a full frame rate of 1 fps (frame per second) with each frame being of size 512 × 512 pixels. By measuring the local magnetic field distribution in different superconducting samples we show that our magnetometer provides an order of magnitude improvement in the signal-to-noise ratio at low fields as compared to ordinary magneto-optical imaging technique. Moreover, it provides the required sensitivity for imaging the weak magnetization response near a superconducting transition where a number of other imaging techniques are practically unviable. An advantage of our CFM design is that it can be scaled in size to fit into situations with tight space constraints. © 2012 American Institute of Physics.