The signal characteristics of the coherent heterodyne Brillouin optical time-domain reflectometry (BOTDR), as well as the impacts of the signal envelope on the spatial resolution and Brillouin frequency shift (BFS) measurement accuracy of the BOTDR are analyzed, respectively. A general algorithm model for the digital envelope detection of an amplitude-modulated (AM) signal and the features of an ideal digital envelope detection algorithm are summarized, respectively. According to the zero phase shift ideal bandpass filtering features and passband designing flexibility of the generalized harmonic wavelet (GHW), a digital BOTDR envelope detection technique based on the generalized harmonic wavelet transform (GHWT) is proposed, and the envelope demodulation scheme is designed. The parameters optimization and experiments are made. The results show that, compared with the existing techniques, an undistorted signal envelope with a higher signal-to-noise ratio can be obtained by the proposed method, resulting in an undegraded spatial resolution and a higher BFS measurement accuracy for the BOTDR system. The experimental results are also analyzed according to the frequency domain characteristics of the algorithms.