A phase modulated real time joint transform correlator is proposed, in which a liquid crystal display screen is adopted as an input device and the joint power spectrum is recorded and displayed by a liquid crystal light valve. The diffraction orders of the grating type structure on the liquid crystal display screen are utilized in this system. As a result, it can use the light energy as well as the physical area of the liquid crystal light valve more efficiently. In order to suit low-resolution of the liquid crystal light valve, and imaging lens is applied to amplifying joint frequency spectrum of the diffraction orders. The two oblique parallel plane glass plates are inserted in the correlator to manipulate the phase differences between the reference image and the target image of the diffraction orders. This technique yields better output correlation performences than the classical real-time joint transform correlator. The experimental results verified the correctness of the system design and performance analysis.