We present an all-digital demodulation system of interferometric fiber optic sensor based on an improved arctangent-differential-self-multiplying(arctan-DSM)algorithm.The total harmonic distortion(THD)and the light intensity disturbance(LID)are also suppressed,the same as those in the traditional arctan-DSM algorithm.Moreover,the lowest sampling frequency is also reduced by introducing anti-aliasing filter,so the occupation of the system memory is reduced.The simulations show that the improved algorithm can correctly demodulate cosine signal and chirp signal with lower sampling frequency. We present an all-digital demodulation system of interferometric fiber optic sensor based on an improved arctangent-differential-self-multiplying (arctan-DSM) algorithm. The total harmonic distortion (THD) and the light intensity disturbance (LID) are also suppressed, the same as those in the traditional arctan-DSM algorithm. Moreover, the lowest sampling frequency is also reduced by introducing anti-aliasing filter, so the occupation of the system memory is reduced.The simulations show that the improved algorithm can correctly demodulate cosine signal and chirp signal with lower sampling frequency.