A differential-phase decoder (DPD) together with a polarization common-path optical heterodyne interferometer is set up. Based on this interferometric configuration and a novel balanced-detector scheme, the performance of the quantum-noise-limited differential-phase decoder is demonstrated and analyzed. The minimum-detectable differential phase is on the order of 10(-7) rad/sqrt Hz when a 2.5 mW He-Ne laser is used. Verified experimentally, the DPD is immune to the common-phase noise induced by an electro-optic phase modulator or by thermal disturbance within the interferometer. This signifies that the minimum-detectable differential phase can become 10(-8) rad/sqrt Hz if a 300 mW continuous wave laser is employed instead.