A displacement gauging apparatus comprising: a light source for emitting a light beam; an extinction ratio converting means; a focusing lens arranged to focus the light beam; an optical fiber of the polarization holding type arranged to transmit the light beam focused by the focusing lens; a polarization beam splitter adapted to divide the light beam transmitted through the optical fiber into two light beams; a diffraction grating fitted to an object of measurement and adapted to receive the two light beams produced by the polarization beam splitter and produce diffracted light beams; two phase plates (20, 21) adapted to change the polarizations of the two diffracted light beams produced by the diffraction grating; and light receiving means arranged to receive the light beam diffracted by the diffraction grating and to detect the displacement of the object of measurement by means of the level of the rate of receiving the diffracted light beam, characterized in that extinction ratio converting means are adapted to raise the extinction ratio of the light beam emitted from the light source to not less than 20 dB; said focusing lens is arranged to focus the light beam of an extinction ratio raised to not less than 20 dB; the light beam focused by the focusing lens with the extinction ratio raised to not less than 20 dB is made to enter the optical fiber with its axis of polarization made to agree with the optical axis of the optical fiber or an axis orthogonally intersecting the optical axis; wherein the displacement gauging apparatus further comprises two reflection prisms (201, 202) having a respective plane of incidence (201a, 202a) and a respective reflection plane (201b, 202b), the reflection prisms (201, 202) are adapted to reflect two diffracted light beams produced from the polarization beam splitter, such that the light beams enter the diffraction grating again and enter the phase plates (20, 21); two reflection mirrors (22, 23) adapted to reflect the two diffracted light beams with the polarizations changed by the phase plates (20, 21) and to lead the light beams to the diffraction grating by way of the phase plates (20, 21) and to the reflection prisms (201, 202) once again; a polarizing element adapted to cause the two diffracted light beams to interfere with each other after being led to the diffraction grating again by the two reflection mirrors (22, 23), diffracted again and made to enter the polarization beam splitter again by the diffraction grating and being reflected by or transmitted through the polarization beam splitter; and wherein the light receiving element is further adapted to receive the interference light beam obtained by the polarizing element. a light source for emitting a light beam; an extinction ratio converting means; a focusing lens arranged to focus the light beam; an optical fiber of the polarization holding type arranged to transmit the light beam focused by the focusing lens; a polarization beam splitter adapted to divide the light beam transmitted through the optical fiber into two light beams; a diffraction grating fitted to an object of measurement and adapted to receive the two light beams produced by the polarization beam splitter and produce diffracted light beams; two phase plates (20, 21) adapted to change the polarizations of the two diffracted light beams produced by the diffraction grating; and light receiving means arranged to receive the light beam diffracted by the diffraction grating and to detect the displacement of the object of measurement by means of the level of the rate of receiving the diffracted light beam, characterized in that extinction ratio converting means are adapted to raise the extinction ratio of the light beam emitted from the light source to not less than 20 dB; said focusing lens is arranged to focus the light beam of an extinction ratio raised to not less than 20 dB; the light beam focused by the focusing lens with the extinction ratio raised to not less than 20 dB is made to enter the optical fiber with its axis of polarization made to agree with the optical axis of the optical fiber or an axis orthogonally intersecting the optical axis; wherein the displacement gauging apparatus further comprises two reflection prisms (201, 202) having a respective plane of incidence (201a, 202a) and a respective reflection plane (201b, 202b), the reflection prisms (201, 202) are adapted to reflect two diffracted light beams produced from the polarization beam splitter, such that the light beams enter the diffraction grating again and enter the phase plates (20, 21); two reflection mirrors (22, 23) adapted to reflect the two diffracted light beams with the polarizations changed by the phase plates (20, 21) and to lead the light beams to the diffraction grating by way of the phase plates (20, 21) and to the reflection prisms (201, 202) once again; a polarizing element adapted to cause the two diffracted light beams to interfere with each other after being led to the diffraction grating again by the two reflection mirrors (22, 23), diffracted again and made to enter the polarization beam splitter again by the diffraction grating and being reflected by or transmitted through the polarization beam splitter; and wherein the light receiving element is further adapted to receive the interference light beam obtained by the polarizing element.