To solve the short working distance and small measurement range of all-fiber interferometer, we proposed an all-fiber interferometry system based on sinusoidal phase modulation. An electro-optical modulator is combined in reference arm to generate modulated reference beam, which interferes with the target reflected beam received by the collimator. After extracting orthogonal components from interference signals according to phase-locked amplification principle, an observation model composed of orthogonal components is first established. The amplitude and bias of the orthogonal components are iteratively estimated and corrected by Kalman filtering to reduce the amplitude drift and additional bias caused by phase delay, modulation depth drift, parasitic interference, etc. Then the inverse tangent method is used to demodulate the phase difference between the reflected light and the reference light. The phase solution simulation and displacement measurement experiments of analog interference signals are carried out. Simulation and experiment verify the validity of the proposed method. The experimental results show that the displacement measurement system can achieve a working range of 20 cm and a measurement accuracy of 10 nm.