We propose an improved Gaussian curve fitting method based on the Hilbert transformation (HTG) to tackle the ineffectiveness of the traditional peak-seeking algorithm in detecting the multi-peak Fiber Bragg grating (FBG) reflection spectra. A five-point sliding filter is used to process the FBG reflection spectral signal, de-noise and smooth the noise, and select the optimal threshold point by the Hilbert transformation (HT). The sub-spectra of the multiple FBG reflection spectral signals were derived and the initial positioning of the spectral peaks were achieved. The Levenberg–Marquardt (LM) algorithm is used to extract the Bragg wavelength from the segmented sub-spectral signals as well as optimize the Gaussian curve fitting coefficients. The HTG-LM algorithm is then proposed, and is optimized and utilized to achieve precise positioning of the spectral peaks. The theoretical analysis and experimental results showed that the proposed HTG-LM algorithm could dynamically detect the multiple reflection spectra of the FBG sensing system with good stability, and at the same time, reduce the amount of peak-seeking data, which is highly beneficial to improve the signal demodulation rate. The peak detection accuracy of the proposed algorithm is better than 1 pm and the precision is better than 4  ×  10^−  7  pm, which indicates that this HTG-LM algorithm provides an accurate demodulation algorithm for the FBG sensor networks. As a result, it is a promising multi-peak detection algorithm proposed by this paper to be applied to the FBG sensing systems.