High resolution is always a pursuing target in the imaging field, as a new prospective technique in imaging applications, digital in-line holography has become a very active field for compactness, more information and low-cost. However, for compact system, the resolution is often limited by sensor pixel size. To overcome this problem, we propose an iterative reconstruction method with data interpolation based on the grating illumination. In our method, the Talbot self-image of a Ronchi grating is exerted in the sample plane as a priori constraint which lead to the convergence of the iteration, the iteration between the sample plane and the sensor plane can provide some extra information with interpolation in the sensor plane based on the a priori constraint, furthermore, the iteration reconstruction can also eliminates the twin-image to improve the image quality. Numerical simulation has been conducted to show the effectiveness of this method. In order to make a further verification, we have developed a lensless in-line holographic microscope with a compact and wide field-of-view design. In our setup, the sample was under the Talbot image illumination of the Ronchi grating, which was illuminated by a collimated laser beam, and holograms were recorded by a digital imaging sensor. We can shift the grating laterally to get a wide-field image. We demonstrated the resolution of our imaging system by using the USAF resolution target as a sample, and the results shown the resolution improvement of the image.