Phase-sensitive squeezing in the resonance fluorescence of two-level atoms, that are coherently driven by a near-resonant laser field in free space, was observed recently (Lu et al 1998 Phys. Rev .L ett. 81 3635). This was accomplished via homodyne detection at a phase near ±45 ◦ relative to the driving field for strong off-resonant excitation of ‘long-lived’ atoms (where th ea tomic lifetime far exceeded the laser–atom interaction time, meaning that relaxation effects could be ignored). On the other hand, traditional theoretical predictions of phase-sensitive squeezing in the resonance fluorescence from two-level atoms have emphasized in- and out-of-phase (i.e., 0 ◦ and 90 ◦ ) quadratures, and weak, on-resonant excitation of ‘short-lived’ atoms (where the observation time for laser–atom interaction fa re xceeded the natural atomic lifetime, meaning that relaxation effects dominate). Here, we calculate the probability of a delayed-coincidence detection in the interference field of a fluorescing dipole with a local oscillator (LO). We show that, despite the strikingly different conditions in which squeezing occurs in short- and long-lived atoms, squeezing in both cases can be shown to arise from a joint detection of two photons which are related by a quantum jump in the following way: the first photodetection precipitates a quantum jump of the atom to the ground state, and the second measures the mean amplitude of the fluorescent field subsequent to the quantum jump.