A method for precisely measuring the phase retardation of wave plate is presented. In this method, a test wave plate is placed between a polarizer and an analyzer, with the polarizer and the analyzer being rotated to different position, the output power is tested and the phase retardation of the wave plate is reached. The modulated light source and the demodulation technique are used to erase the noises, which are helpless for continuous light, arise from background light and electronics. Since the light path is divided into measurement light path and reference light path and the software division technology is used, the influence of light fluctuation is eliminated and the phase retardation of wave plate can be measured precisely. Main error factors that degrade the measurement accuracy are analyzed in detail, which are wavelength change of the light source, temperature change of surrounding environment, oblique incidence of the light, rotational angle error of the sample carriers and fluctuation of the light power. Phase retardation errors that arise from the above mentioned factors for a piece of crystal quartz plate with thickness of 0.52 mm and phase retardation being 90° at 1064 nm are analyzed and calculated. The influence of light fluctuation is greatly improved after using division technique, and the total error is ±1.58°. The quartz wave plate with thickness of 0.52 mm is tested experimentally, and its phase retardation is 91.06°±1.78°, which consists with the theoretical analysis. Methods about measurement and error analysis can also be used for other wave plates.