Based on the optical fiber laser hydrophone of distributed feedback (DFB), a new demodulation algorithm of single differential division (PGC-SDD) was proposed for the deficiency of traditional phase generated carrier (PGC) demodulation scheme. Compared with the demodulation algorithms of traditional differential cross-multiplication (PGC-DCM) and the Arctan, the improved algorithm could reach the demodulation results with reduced amount of operation steps and computation, in which only the signals in one of the two channels needed differential calculation. The PGC-SDD algorithm could effectively suppress the light intensity disturbance caused by environment and the harmonic distortion caused by modulation depth, which made the demodulation results closer to the signal to be tested. The simulation and experimental results show that the signal-to-noise ratio of PGC-SDD algorithm can reach to 17.5 dB, higher than 12.4 dB of PGC-DCM algorithm and 13.9 dB of PGC-Arctan algorithm.