Abstract Fiber loop ring‐down spectroscopy (FLRDS) is a highly sensitive spectroscopic technology. Here, a spectral processing method is proposed for low‐cost fiber loop ring‐down systems. In the proposed method, the amplitude modulation theory is used to establish a new ring‐down spectral model, and the particle swarm optimization algorithm is introduced into FLRDS. The experimental results demonstrate that the proposed method can effectively process the ring‐down spectral signals acquired from the low‐cost fiber loop ring‐down system. Moreover, this method demonstrates higher accuracy and stronger adaptability than the current widely used method. Owing to its excellent performance, the proposed method has considerable potential to be applied in low‐cost fiber loop ring‐down systems.