A laser feedback interferometry combined with phase-freezing technology is researched. To verify the technology and its measurement resolution, a micro-displacement measurement system is designed. In the system, phase modulator is added to modulate the external cavity phase and phase-freezing technology is used for sampling and demodulation to reconstruct the displacement information of the external target. Measurement system model is established. Modulation-demodulation algorithm simulation based on phase-freezing technology and the displacement measurement experiment are made. Comparing the actual displacement of the external target and the system reconstruction result, the accuracy of simulation and the feasibility of system are verified. The measurement peak-valley (PV) value relative error is less than 3%. It is drawn that the method can effectively improve the measurement resolution of system and achieve the real-time measurement of micro-displacement.