In order to address the wavelength demodulation of the overlapped spectra for the fiber Bragg grating sensor networks with limited source bandwidth, a wavelength demodulation method based on peak match estimation of distribution algorithm is proposed. The proposed method transforms the wavelength demodulation problem into a function optimization problem, where the optimization model is constructed through minimizing the difference between the theoretical spectra and the overlapped spectra. The peak match estimation of distribution algorithm is applied to solve the optimization model and obtain the sensing data for each fiber Bragg grating. Estimation of distribution algorithmutilizes the Gaussian mixture model to build probability distribution of the solution space for fiber Bragg grating sensor network, and the probability model can generate new individuals in the evolution of estimation of distribution algorithm. The peak match operator is introduced into the estimation of distribution algorithm to avoid the mismatch of the peak values of fiber Bragg gratings and obtain the final optimal solution. The experiments are conducted under different numbers of fiber Bragg grating sensor network using the proposed method. The experimental results demonstrate that the proposed method yields the mean errors within 10 pm for the large scale fiber Bragg grating sensor network even when the spectra of fiber Bragg gratings are completely overlapped. Compared with other demodulation methods, accuracy of the proposed method is higher, and it can well solve the wavelength demodulation problem when the spectra of fiber Bragg gratings within the network are partially or completely overlapped. The proposed method provides a new way to improve the multiplexing capability of fiber Bragg grating sensor networks.