A method is presented based on tangent relationship and phase modulation technique for dynamic small angle measurement. Two parallel beams reflected by a measurement arm composed of two prisms are directed into a beam splitter to form an interference signal which is analysed to obtain the measurement result of small angle. A position sensitive device (PSD) is used to measure the separations between the two parallel beams, the measurement equation is simplified and the symmetry requirement of the two prisms in the optical configuration is eliminated. The phase of interference signal is modulated in time domain by sinusoidally changing the injection current of a laser diode. This results in a quasi-heterodyne measurement mode, which increases the measurement accuracy of optical path difference. The method is experimentally demonstrated and the factors affecting measurement accuracy are discussed. The experimental results show the dynamic small angle can be measured with a repeatability of 10-8 rad order of magnitude.