This paper presents a modified pulse width modulation (PWM) readout method for DPS with block-based self-adjusted reference voltage to extend dynamic range (DR). In this scheme, pixel arrays are divided into blocks with the same size, and the exposure process consists of two periods. During the first exposure, block-based reference voltage is generated based on the average photocurrent within the block. In the second exposure, the generated voltage is used as the reference voltage for PWM readout. Then the quantization results are combined together to represent the luminance information. DR and peak signal-to-noise ratio (PSNR) were discussed with different images and integration time. Simulation results show that this scheme can achieve a DR of over 96[Formula: see text]dB with 8-bit memory and 8-bit ADC and 145[Formula: see text]dB with 12-bit memory and 12-bit ADC. It also has 28.98[Formula: see text]dB PSNR on average, better than 20.11[Formula: see text]dB in fixed reference voltage method and 17.25[Formula: see text]dB in ramp reference voltage method. Combining the feature of active pixel sensor (APS) and PWM readout, this scheme allows better DR but also obtains less distortion of the image reconstruction.