We propose a new displacement measurement method using a phase modulation homodyne interferometer and a tunable laser diode as a light source to determine an arbitrary length with a resolution in the order of 10 pm. In the proposed instrument, the displacement of a movable mirror in the interferometer can be converted to a frequency shift of the tunable laser diode. We discuss the principles of the proposed method, the instrumentation, and the experimental results, and compare the proposed method with two commercial displacement sensors. The commercial sensors used are a heterodyne interferometer, the interpolation error of which is also measured, and a capacitive sensor.