A displacement detection method based on two-wavelength grating interferometry was presented. A measurement experiment was carried out by using an integrated grating sensor chip fabricated by silicon-glass bonding bulk process. The measurement setup consisted of a sensor chip, two lasers with wavelengths of 640 nm and 660 nm, two photodetectors and a data acquisition circuit. The sensor chip included moving parts with a reflective surface and a metal grating on the transparent substrate. In experiment, the laser beam illuminated the grating and the grating reflected the laser beam to form a diffraction pattern. As the intensity of the diffracted beams changed according to the displacement between movable structure and substrate, the displacement could be determined with an extended range than single wavelength and the absolute position could be obtained by measuring intensity signals of the two wavelengths respectively. Experimental results show that the initial gap between the moving part and the substrate is about 7.522 μm measured by proposed method and it can implement the displacement measurement in a range of 618 nm with a resolution of 0.2 nm.