A new demodulation method is proposed for time division multiplexing system of fiber-optic hydrophone using a 3×3 coupler. In such a scheme, the fiber-optic hydrophone is made by a 2×2 coupler and 3×3 coupler is used as path-matched differential interferometer. The signal is demodulated by linear combination of the three outputs and digital inverse arctangent approach. Parameters used in demodulation are estimated by singular-value decomposition and ellipse fitting. There is no carrier in this demodulation scheme. In addition, fiber-optic hydrophone can form a nearly zero path difference interferometer which is good for reducing system phase noise. The demodulation method is very simple and feasible for a general asymmetric 3×3 coupler. Correspondingly, it is easy to get a large dynamic range for the demodulated signal. A time division multiplexing experiment system with two sensors is set up. At 1 kHz noise floor, dynamic range, and cross talk are less than 31 μrad/Hz, more than 125 dB, less than 64 dB, respectively.