We propose a new signal-processing method for eliminating measurement errors that occur in the wavelength-multiplexed phase-locked laser diode interferometer. The basic idea proposed here is a very simple but effective way to improve measurement accuracy. With our scheme, the phase in the interference signal is strictly shifted by 2 pi, which enables us to eliminate measurement errors, The equivalent wavelength Lambda is 80 mm, and the measurement accuracy reaches similar to Lambda/600. A step-height measurement was also carried out in the experiment. (C) 1997 Optical Society of America.