In order to solve the problem of demodulation distortion caused by light intensity disturbance and modulation depth drift in phase generation carrier demodulation algorithm, in this paper, an improved phase generation carrier demodulation algorithm for interferometric sensor is proposed. The distortion caused by light intensity disturbance is theoretically analyzed and compared with the demodulation performance of traditional discrete cosine transform (PGC-DCM) and PGC-Arctan(PGC-Arctan) algorithm, the experimental results show that the signal-to-noise ratio (SINAD) of about 30dB can be achieved when the light intensity disturbance (LID) of 1.5rad ~ 3.5rad is introduced, which is nearly 15dB higher than the traditional discrete cosine transform algorithm. At the same time, the dependence on modulation depth C can be eliminated. The total harmonic distortion (THD) of less than 0.1% and the signal-to-noise ratio of 30dB can be achieved in the experiment, which is nearly 10dB higher than the traditional algorithm, and the linearity is as high as 99.99%. This research provides a new scheme for the demodulation of optical fiber interferometric sensor.