A novel demodulation scheme for the fiber Bragg grating sensor based on a new-pattern polarization-maintaining fiber loop mirror is designed to achieve highly stable and accurate wavelength interference demodulation. Based on the matrix optics theory, a model is established for analyzing the elementary principle of the interference demodulation using this fiber loop mirror. Then, the influence of structure parameters on the demodulation precision is deeply analyzed, and a numerical simulation is undertaken. Meanwhile, the optical and electrical modules are developed, and the testing software and monitoring software are designed for eliminating the system structure errors based on LabVIEW. By a sensor detection experiment, the system precision on temperature in the range of 20-90 ℃ can reach the resolution of 0.03 ℃ and the accuracy of ±0.1 ℃. The experimental results agree well with theory analysis, which sufficiently shows that this system has advantages in favorable stabilization, much higher precision and stronger applicability.