An external modulation laser module assembly (EMLMA) is proposed to suppress nonlinear errors in an interferometry system and improve its measurement performance. The EMLMA employs both phase modulation with radio frequency signal and a specific modulation amplitude switching mode, enabling the suppression of noise introduced by spurious reflections. The amplitude modulation reduces the influence of stray and background light by transforming the signal of interest to a high-frequency bandwidth. Experimental results show that the measurement error and stability of the interferometry system are significantly improved using the proposed light source module. After modulation, the spurious reflection-induced offset is decreased, and the measurement resolution improves from 7 to 2 nm. The EMLMA can replace the light source of any interferometric measurement system without altering the optical measurement structure. The proposed method reduces the influence of nonlinear errors in homodyne interferometry and provides a basis for further improvement of the interferometry performance.