The band-pass characteristic of fiber grating Michelson interferometer is analyzed, which acts as both band-pass filter and Q-switch. An erbium-doped fiber ring laser based on fiber grating Michelson interferometer is implemented for producing single longitudinal mode CW operation with 5 MHz spectral linewidth and up to 6 mW output power. In Q-switched operation, stable fiber laser output pulses with repetition rate of 800 Hz, pulse width of 0.6 μs, average power of 1.8 mW and peak power of 3.4 W are demonstrated. The peak power and average power of the Q-switched pulses are varied with the repetitionrate.