A passive wavelength demodulation system based on linearly polarized light interference principle is proposed. Leading-in a section of polarization-maintaining fiber to the common fiber loop mirror (FLM) is equivalent to leading-in birefringence effect to the common FLM. As the parameters of polarization-maintaining fiber are determined, the value of effectual refractive index difference is fixed and the reflective (transmission) light intensity of the FLM becomes a function of the coupler′s prismatic ratio K, the temperature t, the length of the polarization-maintaining fiber L and the included angle of the polarization directions in the two ends. When the fabric is determined, there exists a corresponding relation between the reflective (transmission) light intensity and t in the monotonic interval. The theoretical model is established according to the matrix optics principle. The impact characteristics to the relation between the reflective (transmission) light intensity of FLM and the incidence light wavelength from the length of polarization-maintaining fiber, the coupling coefficient of coupler and the incidence included angle of the polarization light are researched. Using fiber grating as the sensing head to monitor the variation of temperature, the data show that the system′s average measuring precision of the temperature can be up to 0.03 ℃ and the veracity can be up to ±0.1 ℃.