In order to ameliorate the performance in vibration measurement, sinusoidal phase modulating technique is introduced into a conventional laser self-mixing interferometer. An electro-optic modulator is placed in the external cavity of the light source to yield sinusoidal phase modulation. The self-mixing interference signal is processed in frequency-domain to retrieve a vibration waveform. The dynamic range of the system is analyzed by proposing the stop-order theory and a relationship between the lowest modulating frequency of the electro-optic modulator, and the parameters of a vibration are obtained to guarantee the validity of a measurement result. Experimental vibration measurement results of a commercial piezoelectric transducer are compared with simultaneous measurement results from Agilent 5529A dynamic calibrator, and an accuracy of 20 nm is achieved. It is shown that the phase-modulated laser self-mixing interferometer is suitable for real-time continuous vibration measurement.