Lasers have introduced many advantages to the medical field of osteotomy (bone cutting), however, they are not without drawbacks. The thermal side effects of laser osteotomy, in particular, affect a patient’s healing process. Employing an irrigation system during surgery is a standard solution for reducing thermal damage to the surrounding tissue, but, due to the high absorption peak of water at the wavelength of Er:YAG laser (2.96 μm), accumulated water acts as a blocking layer and reduces the ablation efficiency. Therefore, irrigation systems would benefit from a high-speed and accurate feedback system to monitor the temperature changes in the tissue of interest. Phase-sensitive optical coherence tomography (PhS-OCT) is a highly sensitive method for measuring internal displacement (photothermal-induced expansion) during laser surgery. In this study, we utilized the integrated swept source PhS-OCT system (operating at a central wavelength of 1314 nm and with an imaging-speed of 104,000 A-scans/s) with an Er:YAG laser to detect localized phase changes induced by laser ablation irradiation and thereby quantify the photothermal-induced expansion of bone. The PhS-OCT system was calibrated by measuring the phase changes corresponding to the displacement of cover glass attached to a piezoelectric actuator (PA4HEW, Thorlabs) at different operating voltages. Furthermore, we explored how the induced photothermal expansion of bone changes when irradiated by different pulse energies. Using a PhS-OCT system to spatially and temporally resolve measurements of axial displacement of bone during laser surgery can play an important role in determining the corresponding temperature map, which can, in turn, offer feedback to the irrigation system in smart laser osteotomy.