This paper proposes to process the interference outputs of the Sagnac/Mach-Zehnder interferometer by using time-domain cross-correlation method, which is a distributed optical fiber sensing system, to detect and locate the disturbance. Firstly, it gives the theoretical analysis of Sagnac/Mach-Zehnder interferometer, derives the expression for the interference outputs and uses Bessel function to expanse the expression, demonstrates the two interference outputs of the system meet the time-domain cross-correlation properties. Based on further analysis of the expression of two interference signals, it proposes two time-domain cross-correlation method by the baseband positioning method and differential positioning method to approach the interference signal to determine the disturbance location.