Aiming at low stability and high harmonic distortion of the traditional phase-generated carrier (PGC) demodulation algorithm, we propose a modified demodulation algorithm for distributed strain sensing in phase-sensitive optical frequency domain reflectometry (OFDR). The proposed algorithm combines the arctangent function and differential-self-multiplying (ARC-DSM), which eliminates the effect of modulation depth and realizes the high precision strain variation measurements. Simulation results show that distortion and harmonic distortion are effectively suppressed by the ARC-DSM algorithm. The minimum variation of the measurable static strain is about 0.3με and the spatial resolution can reach 0.2 m within 270 m range.