A fiber Bragg grating (FBG) wavelength shift demodulation method based on tunable distributed feedback laser diode (DFB-LD) is proposed. A highly effective algorithm is proposed to demodulate the strain of the sensing FBG, which is scanned by the tunable DFB-LD. The system is unique in that accurate demodulation can be achieved by scanning only a 0.4-nm bandwidth FBG spectrum instead of relying on scanning the FBG’s principal power peak and the scanned spectrum can be any part of the FBG. Thus, the demodulation system is much more simplified in comparison to a traditional demodulation system, which enables using wavelength-division multiplexing for the FBG sensing network. With the strain experiment of the FBG, the results match the theory of the proposed demodulation method very well, and the errors of the strain experiment are within 2 pm. The tunable DFB-LD is based on reconstruction-equivalent chirp (REC) technology. The REC technology potentially offers a low-price, compact, and high-performance solution for the demodulation.