A digital signal processing algorithm, the moving reference line crossing count method (MRLCCM), was developed to implement the structural strain measurement by a passive demodulated fiber optic Michelson interferometric sensor. The fiber optic Michelson sensor, which is constructed of a 3 x 3 fiber optic coupler, can give information about the magnitude and direction of the strain of structures. The beating, drifting and noise, which are caused by the longitudinal strain and the lateral strain of the fiber, bring about the counting error of the phase differences which are directly converted to the structural strain. The developed algorithm is based on the reference line crossing count method and resets the reference line during the presence of the signal drifting. The accuracy of the strain calculation was confirmed by the various simulated fiber optic signals with signal beating, drifting and noise. A passive demodulated 3 x 3 fiber optic Michelson interferometric sensor was bonded on the cantilevered aluminum beam for experimental strain sensing. The capability of real-time processing was verified by the real fiber optic signals.