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Detecting low concentrations of biomarkers is essential in clinical laboratories. To improve analytical sensitivity, especially in identifying fluorescently labeled molecules, typical optical detection systems, consisting of a photodetector or camera, utilize time-resolved measurements. Taking a different approach, magnetic modulation biosensing (MMB) is a novel technology that combines fluorescently labeled probes and magnetic particles to create a sandwich assay with the target molecules. By concentrating the target molecules and then using time-resolved measurements, MMB provides the rapid and highly sensitive detection of various biomarkers. Here, we propose a novel signal-processing algorithm that enhances the detection and estimation of target molecules at low concentrations. By incorporating both temporally and spatially resolved measurements using human interleukin-8 as a target molecule, we show that the new algorithm provides a 2–4-fold improvement in the limit of detection and an ~25% gain in quantitative resolution.