An intermodal fiber interferometer with an optical frequency scanning light source is considered to attain two main goals: signal fading elimination and achieving a linear response to external fiber perturbations. It is demonstrated that the interferometric signal traces repeatedly generated by the laser frequency scans can be used to average the target signal by calculating their autocorrelation function. A correlation approach is studied for signal processing, and various correlation function modifications are proposed and theoretically analyzed to achieve complete signal reconstruction. In particular, the relation between the autocorrelation function and the averaged amplitude characteristic is demonstrated. The efficiency of the proposed interferometer’s scheme and the correlative signal processing are confirmed experimentally for the case of a sine-shaped fiber length modulation. We believe that the proposed method will be useful in real-time sensing applications.