To resolve the conflict of large measurement range and high accuracy in the existing real-time laser diode (LD) interferometers for displacement measurement, a novel real-time LD interferometry for displacement measurement is proposed and its measurement principle is analyzed. By use of a new phase demodulation algorithm and a new phase compensation algorithm of real-time phase unwrapping, the measurement accuracy is improved, and the measurement range is enlarged to a few wavelengths. In experiments, the peak-to-peak amplitude of the speaker vibration was 2361.7 nm, and the repeatability was 2.56 nm. The measurement time was less than 26 microseconds.