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In this paper, we analyze the performance of the fiber Bragg grating (FBG) interrogation system based on an arrayed waveguide grating (AWG) device. The spectrum of light reflected from the FBG sensor is analyzed using an AWG, which acts as a coarse spectrometer. Using measurement points from the AWG channels, the original spectrum of the sensing element is reconstructed by means of curve fitting. The measurement system is modeled in the LabView environment, which allows the modification of the FBG and AWG parameters and simulating the measurement process. This, in turn, allows the quantification of the measurement errors resulting from the nonlinearity of the particular FBG/AWG configuration, and allows the optimization of the system design for the particular measurement errors permitted. In addition to the simulations of the proposed measurement system, we provide details of the laboratory evaluation.