The invention provides a direct-reading magnetic flux modulation reading circuit and method. The reading circuit comprises a SQUID device, a pre-amplifier for amplifying the output signal of the SQUID device, a high-pass filter for filtering a DC component and low-frequency noise, a modulation/demodulation signal generator, a demodulator for demodulating the output signal of the high-pass filter, an integrator for carrying out integration and generating a response voltage signal, and a feedback module for feeding back the response voltage signal to the SQUID device. Through modulation, the working point of the SQUID device is allowed to be switched between two working points, and the change trends of the two working points are opposite; and the measured signal is subjected to amplification, high-pass filtering, demodulation and integration, and then, is fed back to the SQUID device, so that the working point is locked. Isolation of the low-frequency noise and the output DC bias of the pre-amplifier is realized through the high-pass filter; the SQUID magnetic flux-voltage conversion coefficient does not reduce due to the load effect; higher harmonic distortion does not occur to a SQUID magnetic flux-voltage curve; the problem of thermal noise of a transformer is prevented; and the circuit is simpler in structure and higher in practicality.