Electric arc discharge erasing (ADE) effect, which can erase the refractive index modulation in fiber Bragg gratings (FBGs), is demonstrated. Based on ADE technique, the phase-shifted fiber Bragg grating (PSFBG) is fabricated successfully. According to the characteristics of the ADE effect, the theoretical model of PSFBGs produced by this process is built, based on the changes of FBG refractive index and erased length by arc discharges. A comprehensive simulation study is conducted under different FBG parameters. The specific fabrication setup is designed, and the fabrication technique of PSFBG based ADE is studied experimentally. The evolution of the PSFBGs′ main parameters, including the wavelength, the intensity and the bandwidth of transmission peak, is investigated experimentally under various conditions, which include changes of the strain, the parameters of electric arc discharge, the properties of the FBGs and annealing treatment factors. The theoretical simulation and experimental study are consistent. It is shown that the PSFBG fabrication technique based on ADE is convenient and effective, and high-quality PSFBG can be produced by optimizing the parameters of arc discharges and FBGs.