In the laser diode interferometer with a photothermal wavelength modulation which is used for optical fine measurement, intensity fluctuations of the light source cause measurement errors though the fluctuations decrease greatly as compared with the injection current modulation of wavelength. In this paper, we investigated the effect of photothermal-modulation parameters of wavelength on the intensity fluctuations of the light source. Choosing appropriate photothermal-modulation parameters, we measured microdisplacements of objects with a high measurement accuracy.