The phase modulation depth (PMD) in phase-generated-carrier demodulation is determined by the laser frequency modulation amplitude and working distance of a fiber-optic interferometer and must be set at a certain value. Active setting of the amplitude is unsuitable, especially for high-speed modulation, owing to variations in the laser source tuning coefficients. Existing calculation schemes for passive setting cannot work both owing to carrier phase delay (CPD) and the accompanied optical-intensity modulation (AOIM). Herein, a modified phase modulation depth calculation and setting technique is proposed. Double photoelectric detection and signal division are optimized to eliminate AOIM using a fiber delay chain and phase-locked amplifier module. Fast Fourier-transform and look-up table methods are used to calculate phase modulation depth without adding the carrier, which is unaffected by CPD. A fiber-optic Michelson interferometer is constructed to verify the feasibility of the proposed method. The experimental results show that AOIM can be eliminated; moreover, PMD can be calculated and set precisely. The displacement deviation is less than 1.03 nm. The resolution of measurement is considerably lesser than 1 nm and nanoscale accuracy is achieved in displacement measurement.