Detailed investigation has been made of a surface acoustic wave FM demodulator in which the phase difference between the input and output signals of a SAW delay device is detected. Total harmonic distortion of the audio output signal is measured to be 0.05%, a value comparable with best commercial practice with demodulators operating at a frequency deviation of 75 KHz with a center frequency of 10.7 MHz. Distortion mainly consists of evenorder harmonic components which are less objectionable to a listener than the odd-order harmonic components found in conventional high quality FM demodulators. Analysis shows that the distortion can be reduced reducing both the amplitude of the SAW spurious signals and the delay time difference between the spurious and main delay signals. The spurious SAW signals of concern included those from direct feed-through, triple-transit echoes, bulk waves, and edge reflections. Techniques for reducing or eliminating these are described. Calculated results are in fairly good agreement with experiment.