Abstract The continuous increase of the amplitude of the measured vibration will cause spectrum aliasing in the interference signal of the sinusoidal phase modulating interferometer (SPMI), thereby constraining its measurement dynamic range (DR). To address this issue, a dynamic range extension method of SPMI based on the reconstruction of in-phase component signal is proposed. On the basis of conventional SPMI, an additional reference signal is introduced for estimating the phase modulation depth (PMD) and the major to minor axis ratio Re of the Lissajous ellipse formed by orthogonal interference signal pair and a phase demodulation algorithm named as PGC-ICR-DCM which integrates PGC-DCM algorithm and the in-phase component signal reconstruction (ICR) is proposed. Initially, the PMD is regulated to approximately 1.8412 rad, ensuring that the quadrature component signal can be accurately extracted from the mixed signal of the interference and carrier signals, even in the presence of spectrum aliasing in the original interference signal. Then, the undistorted quadrature component signal is used to reconstruct an in-phase component signal with the estimated value of Re. Finally, the reconstructed in-phase component signal and quadrature component signal are normalized, and a differential-and-cross-multiplying algorithm (DCM) is applied to obtain the measured vibration. A SPMI measurement system based on Michelson interferometer structure is constructed to experimentally validate the proposed method. The experimental results demonstrate that the proposed method can effectively extend the DR of the SPMI system in the presence of spectrum aliasing. The DR of the system is increased from 97.52 dB @ 55 Hz to 102.6 dB @ 55 Hz, with the maximum measurable amplitude increasing from 7728.75 nm @ 55Hz to 13705.16 nm @ 55 Hz.