To achieve synchronous demodulation of a large-capacity Fiber Bragg Grating (FBG) sensor network, a FBG demodulation system based on modulated grating Y-branch (MG-Y) tunable laser is designed, combining wavelength division multiplexing and space division multiplexing technologies. In this paper, a novel demodulation algorithm based on the variable-step-size method and cross-correlation algorithm is proposed to demodulate the wavelength of an FBG. The characteristic feature of these sensors is that the position of the spectrum changes due to the action of a particular physical quantity. This content is available for download via your institution's subscription.