The invention provides a signal demodulation method of an FBG (Fiber Bragg Gratings) sensing system. According to the method, a denoising method being compatible with smoothness and edge maintaining is used for eliminating noise in an FBG sensing signal; then, performing iterated fitting region division on denoised data to determine all single-peak regions; finally, using the slope ratio 1 normalizing degree of a corrected spectral curve as a target function of iteration in each time; performing sharpening correction on an asymmetric spectrum of the single-peak region by using a weighted first-order derivative; and performing spectral peak demodulation on a corrected symmetric peak to obtain the center wavelength position of an FBG signal. The denoising method being compatible with smoothness and edge maintaining is used; the noise interference is eliminated; meanwhile, feature information of the signal can also be protected against loss; through the iterated fitting region division, the defects of complicated recursion, divided region asymmetry and the like of a conventional method are overcome; and the dividing efficiency and the dividing accuracy are improved. Through sharpeningcorrection on the asymmetric spectrum, the spectrum peak demodulation precision is improved, so that the detection precision of the FBG sensing system is improved.