Synthetic-heterodyne demodulation is a very useful technique for signal detection in interferometric sensors. The demodulation process is usually accomplished using analogue circuits. Improved functionality can be obtained by using a digital signal processor. In this paper, an expression is derived for the sensor sensitivity where both laser phase noise and signal acquisition quantization noise are considered. The demodulation technique requires modulation of the laser frequency, usually accomplished by modulation of the laser current. An expression is derived for the second-harmonic distortion caused by the laser power modulation. The detection scheme was implemented on a digital signal processor and used to detect dynamic pressure signals with a bandwidth of 550 Hz.