An improved self-mixing grating interferometer based on the Littrow structure has been proposed in this Letter to measure displacement. The grating is integrated inside the interferometer to reduce the impact on the vibration parameters of the object caused by the grating attached to the vibrating object. The +1st diffracted light returns to the laser cavity after being reflected by the target object, and self-mixing interference occurs. The displacement can be reconstructed by processing the self-mixing signals. The feasibility of the proposed interferometer is demonstrated by experimental measurements, and results show that it can achieve micro displacement measurement with the maximum absolute errors of less than 50 nm.