To detect underwater sound-generating targets, a water surface acoustic wave laser interference and signal demodulation technique is proposed in this paper. The underlying principle of this technique involves casting a laser beam onto the water surface disturbed by an underwater acoustic source and creating interference between lights reflected by the surface and reference lights. A data acquisition and processing system was employed to obtain water surface acoustic wave information from the interference signals by means of demodulation, thus allowing detection of the underwater target. For the purpose of this study, an interference detection platform was set up in an optical dark chamber. High-frequency water surface fluctuations were introduced in the reference optical path as the phase generated carriers to create laser interference signals in two different paths, which received demodulation based on an improved arc tangent demodulation algorithm and characteristic ratio algorithm, respectively, in view of their different frequencies. Water surface wave information was then derived from such low-frequency and high-frequency signals. According to test results, in the frequency range of 200 Hz–10 kHz, the frequency detection accuracy was better than 1 Hz. The amplitude measurements exhibited high repeatability, with a standard deviation lower than 2.5 nm. The theory proposed in this paper is therefore experimentally verified with good results.