As the locating accuracy of a Mach-Zehnder fiber sensing system is effected by the initial phase shift in practical use, a passive digitalized demodulation method based on 3×3 fiber couplers was proposed according to the optical path structure. First, two outputs of the 3×3 couplers were used to form an ellipse curve, and then the signal coefficients were estimated by Least Square Method under constraints. Finally, the required phase signal was demodulated by differential and cross-multiplication. Compared with traditional demodulation methods, it lowers the requirements for the symmetry of couplers, and imposes no extra limits on other parameters. The ellipse fitting is robust under constraints, especially adaptable to those data less ideal in ellipse shapes. Simulation and field experiment prove that the method with a small computation is feasible and practical. The demodulated phase signal correlation is 0.992 0 and the position error is 81.2 m over a pipeline with a length of 43 km. The digitalized demodulation method virtually enhances the system function, and shows considerable application values.