At present, a phase demodulation <inline-formula><tex-math notation="LaTeX">$\phi$</tex-math></inline-formula>-OTDR-based on an unbalanced interferometer is widely used, but its demodulation module is easily affected by external vibration noise. To improve the reliability of a <inline-formula><tex-math notation="LaTeX">$\phi$</tex-math></inline-formula>-OTDR, this paper proposed a phase demodulation method based on a balanced interferometer, which uses the Sagnac interferometer to obtain two Rayleigh scattering intensities and then recovers the phase information using an incoherent phase demodulation algorithm. The experimental results show that the proposed method can recover the disturbance signals on the sensing optical fiber well, even when the demodulation module is in serious external vibration noise including a vibration table shaking with different frequencies, opening and closing a door, and a car honking. These results indicate that the proposed method significantly reduces the influence of environmental vibration noise on the demodulation module, and offers a promising solution for the application of a <inline-formula><tex-math notation="LaTeX">$\phi$</tex-math></inline-formula>-OTDR in a harsh environment.