We demonstrate a method of displacement measurement based on Nd:YAG laser with birefringence external cavity. The measurement system is composed of Nd:YAG laser, a wave plate with phase retardation of 450 and an external feedback mirror. Due to the birefringence effect, the external cavity modulates the laser output intensities in the two orthogonal directions with a phase difference of 900, which is two times to that of the wave plate. Both the in-quadrature laser intensities vary one period, when the external cavity length changes λ/2. These two channel laser intensities with phase difference of 900 can be subdivided to λ/8 after 4-fold evaluation. The movement direction of external mirror can be distinguished by the lead or lag between these two channel signals. Our method can improve the resolution of displacement measurement 4 times that of conventional optical feedback, and reach 133nm for a laser wavelength of 1.064µm.