The invention provides a light path difference measurement method based on space light path difference modulation and a device thereof. (1) a broadband LED through a small circular hole acts as a light source; (2) collimated light beams are formed through a collimating lens; (3) laser and white light are coupled by a first flat beam splitter; (4) the coupled light is split into two identical beams of light through a second flat beam splitter; (5) the two beams of light respectively passes through a reflecting mirror and a corner matched prism which are identical, and one corner matched prism is arranged on a high-precision linear motor translation table so as to provide high-precision light path difference control; (6) the two beams of light is combined through a third flat beam splitter, and a small inclination angle between the two beams of light is provided; (7) interference fringes formed by the two beams of light are imaged to a charge coupled device detector by an imaging lens; (8) the interference fringe position is extracted by using an algorithm; and (9) the light path difference between the two beams of light is calculated so that a measurement result is obtained. The method is not sensitive to atmospheric turbulence. The maximum error is 0.159 microns and is less than average wavelength so that the precision meets the requirements of fringe interference.