Tuning the metal insulator transition (MIT) behavior of VO2 film through the interfacial strain is effective for practical applications. However, the mechanism for strain-modulated MIT is still under debate. Here we directly record the strain dynamics of ultrathin VO2 film on TiO2 substrate and reveal the intrinsic modulation process by means of synchrotron radiation and first-principles calculations. It is observed that the MIT process of the obtained VO2 films can be modulated continuously via the interfacial strain. The relationship between the phase transition temperature and the strain evolution is established from the initial film growth. From the interfacial strain dynamics and theoretical calculations, we claim that the electronic orbital occupancy is strongly affected by the interfacial strain, which changes also the electron-electron correlation and controls the phase transition temperature. These findings open the possibility of an active tuning of phase transition for the thin VO2 film through the interfacial lattice engineering.