We propose and demonstrate a new method of phase-shifting optical fiber sensing, wherein rectangular-pulse binary phase modulation is imposed on the laser source of an interferometric fiber optic sensor to generate three phase-shifting steps of −π/2, 0, and π/2 radians at the output, and the phase shifts that carry the vibration signals are demodulated with an orthogonal demodulation algorithm. This approach offers the advantages of high efficiency and low complexity because it is simple in design and implementation. Moreover, this method can be applied to successfully realize the demodulation of multiplexed systems based on different multiplexing techniques. The techniques are theoretically analyzed and experimentally demonstrated with recovering the sinusoid wave applied to the sensor. Also, in this paper, a simple multiplexed system is proposed and discussed.