Inverse synthetic aperture LADAR (ISAL), based on an electro-optic in-phase and quadrature (I/Q) modulator, and homodyne detection, has high pulse repetition frequency, simple structure, and minimum intra-pulse phase errors. Homodyne detection can implement the de-chirp operation in the optical domain, while the output amplitude is susceptible to light intensity. However, the modulated optical signal amplitude fading, induced by radio frequency devices and the I/Q modulator, is quite tricky to measure and be compensated for. In this work, the effect of amplitude distortion on the ISAL system is analyzed. A simple and effective compensation method (based on homodyne detection) is proposed, followed by some experiments. The improvement of homodyne signal power to the compensated signal compared with non-compensated signal was about 1 dB (26%), and the image quality of our ISAL system along range direction was also improved by using the proposed method. Moreover, the image of an extended target was acquired via our ISAL system with 500 mW transmitting power at a distance of 1.1 km.