A novel two-dimensional (2D) phase grating light modulator for projection display is proposed. It consists of an upper moveable grating, a bottom mirror, and four supporting posts between them. After the driving voltage is applied to the modulator, the upper grating will move down, which induces a phase difference and, therefore, leads to a controlled variation of its diffraction pattern. Optical characteristics of the modulator and the modulator array are analyzed with Fourier optics theory. The analysis shows the incident light will be switched from its zero order diffraction fringe to the first order diffraction fringe when the phase difference between the moveable grating and the bottom mirror changes from $2\pi$ to π. The diffraction pattern of the light modulator array is the coherent superposition of all single modulators. A $16\times 16$ modulator array is fabricated by surface micromachining technology. The test result shows that the device works well when it is actuated by a voltage with a $1\mathrm{kHz}$ frequency and $10\mathrm{V}$ amplitude. Both theoretical analysis and experiment results indicate that the 2D phase grating light modulator has potential application in a projection display system.