Aiming at the precise demodulation of three-dimensional coordinate with point-diffraction interferometer, a method based on Levenbery-Marquardt (L-M) algorithm is proposed for three-dimensional coordinate measurement. With the phase distribution demodulated in point-diffraction interferometry, a double-iterative method based on L-M algorithm is applied to reconstruct the three-dimensional coordinate of point-diffraction source. Both computer simulation and experimental measurement comparing with coordinate measurement machine are carried out to verify the feasibility of the proposed measurement method. Experimental results show that the proposed method can both reach the measurement precision in the order of micron within a 100 mm×100 mm×300 mm working volume. This measurement method does not rely on the initial iteration value, and also has high measurement precision, fast processing speed and preferable anti-noise ability. It is of great practicality for measurement of three-dimensional coordinate and calibration of measurement system.