A method to measure micro-displacements based on grating projection is proposed and analyzed theoretically. A grating is illuminated by a collimated laser beam and projected onto an object to be measured through a 4f optical system with an aperture in its frequency plane. The grating projection is imaged on a detection grating through another 4f optical system after reflected by the surface of the object. The detection grating is imaged on a detector and its imaging beam is modulated by a photoelastic modulator. The micro-displacement of the object is obtained by detecting the light intensity on detector. In experiments, the feasibility is verified and the repeatability of the method is less than 25 nm (1σ).