Aimed at the shortcoming in application of grating in calibrator of dial gauge, a method to subdivide grating displacement with high precision was proposed which is realized via software. Through programming on STM32, the two orthogonal sinusoidal signals on grating were sampled and analyzed to achieve reversible counting and subdivision of moire fringe. The great advantage of method was the needless of counting and subdividing circuit thus making the system simple, reliable and cost-effective. An experiment research was conducted to subdividing the 20 μm raster pitch into 200 folds, and Renishaw laser interferometer test demonstrated the precision of the method. The results show that the precision meets the requirement.