As the key of embedded displacement measurement, a fiber-optic micro-probe laser interferometer (FMI) is of great interest in developing high-end equipment as well as precision metrology. However, conventional phase-generated carrier (PGC) approaches are for low-speed scenes and local error analysis, usually neglecting the global precision analysis and dynamic effect of system parameters under high-speed measurement, thus hindering their broad applications. We present a high-speed PGC demodulation model and method to achieve subnanometer displacement measurement precision in FMI. This model includes a global equivalent resolution analysis and revelation of the demodulation error mechanism. Utilizing this model, the failure issues regarding the PGC demodulation method under high speed and large range are addressed. Furthermore, an ultra-precision PGC demodulation algorithm based on the combination of static and dynamic delay adaptive regulation is proposed to enable high-speed and large-range displacement measurement. In this paper, the proposed model and algorithm are validated through simulation and experimental tests. The results demonstrate a displacement resolution of 0.1 nm with a standard deviation of less than 0.5 nm when measuring at a high velocity of 1.5 m/s—nearly a tenfold increase of the latest study.