Dynamic range, the ratio of maximum detectable amplitude, and the noise level, are of great importance in characterizing the performance of an interferometric fiber-optic sensor (IFOS). Here we analyze the dependence of dynamic range on carrier frequency and repetition frequency in a time-division-multiplexing (TDM) IFOS array using a heterodyne detection scheme. A novel, to the best of our knowledge, demodulation method with higher carrier frequency and an upgraded algorithm is proposed to improve the dynamic range. In the simulation and experiment, the carrier frequency was increased from 50 kHz to 20 MHz, and the demodulation method was adjusted correspondingly. The maximum detectable phase amplitude is elevated by more than 6 dB as the theoretical expectation, and the demodulated noise floor is proven to be barely influenced, holding at ∼-100 dB ref rad/H z. Experimental results demonstrate that the average dynamic range over 10 Hz to 20 kHz is enhanced by approximately 10.5 dB. The analysis and optimization presented here provide an effective solution to improve the dynamic range of TDM IFOS without any hardware change, which is promising in various applications.