Fiber Bragg grating (FBG) is considered a good candidate for acoustic emission (AE) measurement. The sensing and measurement in traditional FBG-based AE systems are based on the variation in laser intensity induced by the Bragg wavelength shift. This paper presents a sensing system by combining self-mixing interference (SMI) in a laser diode and FBG for AE measurement, aiming to form a new compact and cost-effective sensing system. The measurement model of the overall system was derived. The performance of the presented system was investigated from both aspects of theory and experiment. The results show that the proposed system is able to measure AE events with high resolution and over a wide dynamic frequency range.