The conventional laser triangulation displacement sensor (LTDS) is difficult to achieve large dynamic range and high precision measurement simultaneously, since LTDS is affected by factors such as limited detector size, nonlinear input and output variables, laser power fluctuation, speckle noise, electronic noise, etc. Given the above background, we proposed a modified LTDS using a diffraction grating to improve the dynamic range and precision simultaneously. Different from the conventional LTDS, the modified LTDS generates more than one spots on the image sensor, thereby the displacements with different ranges can be obtained from the multiple order diffraction spots. Ultimately, the dynamic range and measurement accuracy will be improved simultaneously by integrating these displacements. In this paper, the principle of the modified LTDS for large dynamic range and high precision measurement is described in detail, and we verified the validity and effectiveness of this idea through the experiment. Compared with the traditional LTDS, the experimental results show that the linearity of the modified LTDS is improved by a factor of 1.5685 and the dynamic range is improved 1.2986 times as well as maintaining the same linearity.