We demonstrate a novel method that makes an efficient use of laser nonlinear dynamics when subject to optical self-injection for subwavelength displacement sensing purposes. The proposed methodology combines two different phenomena taking place inside the laser cavity: optical self-injection, which results in optical feedback interference, and laser continuous wave frequency modulation, giving rise to a wavelength sweeping effect in the laser's emission. We present a combination of these phenomena to measure vibration amplitudes below lambda/2 with the resolutions of a few nanometers, bandwidth dependent upon the distance of external target, amplitude, and frequency of current modulation. The basic theoretical details and a mathematical model are presented for the developed measurement principle. Experimental results with the system working as a vibrometer to measure a target vibration of amplitude lambda/5 (137.5 nm) with a mean peak-to-peak error of 2.4 nm just by pointing the laser diode onto the target and applying some signal processing are also demonstrated.