Based on detailed analysis of modulation methods, frequency mixing principle, modulation depth value and so on, in order to get a better ability of anti-interference, combining the phase generated carrier demodulation and modulation technology with the differential and cross multiplying demodulation algorithm, introducing the method of division operation, an improved phase generated carrier demodulation method was proposed in this paper to reduce the effect of light intensity disturbance. Meanwhile, its demodulation results were compared with that of the traditional method and a simulation experiment was carried out. The demodulation results when the frequency of signal source is 20 Hz and 200 Hz were compared, the results indicate that in the condition of light intensity has a 1 Hz low frequency disturbance, the improved demodulation algorithm is much better than the traditional algorithm, especially in linearity and capacity of resisting low frequency disturbance for high frequency demodulation.