Synthetic Aperture Radar Interferometry (InSAR) can produce accurate Digital Elevation Model (DEM), and a novel spotlight SAR can get higher azimuth resolution than conventional strip-map SAR. Hence, the combination of InSAR and spotlight SAR techniques implies the potential to obtain higher resolution DEMs which will show more tiny terrain variations. However, in spotlight InSAR processing, additional azimuth interferometric fringes and misregistration decorrelation will be induced by conventional co-registration methods which ignore azimuth varied Doppler centroids in interpolations. Meanwhile, because interferometric fringes in regions with high resolution terrain variations can easily be damaged by random phase noise, there will generate more unreliable unwrapped phase areas with conventional phase unwrapping methods. To eliminate residual azimuth fringes, misregistration decorrelation and unreliable unwrapped phase areas, this paper firstly proposes a novel spotlight SAR interferometry processing method based on co-registration related to two-dimensional Doppler centroid estimation and joint phase unwrapping, and it is validated by using TerraSAR-X spotlight data. The final generated 4 m × 4 m grid space DEM not only preserves high resolution, but also has low root mean square error and absolute mean error which are less than 3 m with respect to the Google earth DEM.