We present a novel approach for the generation of high extinction-ratio square pulses based on self-phase modulation of sinusoidally modulated optical signals (SMOS). A SMOS in a nonlinear medium experiences self-phase modulation induced by the nonlinear Kerr effect leading to the generation of distinct sidebands. A small variation in the peak power of the SMOS leads to a large variation in the power of the sidebands. Impressing a square pulse on the SMOS and filtering a sideband component results in a higher extinction-ratio square pulse. The advantage of high extinction-ratio pulses is demonstrated by a reduced background noise level in the Rayleigh backscattering traces of a phase-OTDR vibration measurement system.