Considering the requirement of high accuracy, a novel Fiber Bragg Grating (FBG) modulation method to fit the FBG wavelength with multi-peak reflectivity is proposed. Application of Levenberg-Marquardt algorithm in fitting of peak-reflectivity by sidebands was discussed. The relation model was researched by reflecting central wavelength and peak-reflectivity of sidebands based on the reflex action of FBG for multi-wavelength source. Levenberg-Marquardt algorithm was used to extract the characters from the reflectance spectra to mark sensing information. Temperature resolution 0.1℃ and strain resolution 0.5 με is respectively obtained. The experimental results show that the new method has something referential value to give a guarantee to suit the high accurate measurement with FBG monitoring system.