Optical detection systems usually rely on the intensity contrast (visible) or temperature difference (infrared) between target and background. Adding new dimensionality to the detection process is essential to enhance the sensitivity. This paper presents a novel theory for modeling the performance of an optical detection technique called Interferogram Phase Step Shift (IPSS), which relies on the coherence contrast between target and background to perform discrimination. The technique uses an interferometer to measure the self-coherence function of the input radiation, forming an interferogram, and an interference filter to produce an event marker (phase step) in it. The model predicts the displacement of the phase step in the interferogram, when a coherent target enters the system field of view, which is the kernel of the IPSS technique. The paper assesses the effects of the target to optical filter bandwidth ratio in the system responsivity, for optimization purposes, and models the experiments presented in a previous publication, predicting the experimental results theoretically to perform a comparison. It also includes the analytical derivation of the self-coherence functions of target and background as measured by the system's interferometer, and the computer modeling of the same self-coherence functions for an interference filter, with any arbitrary spectral response, considering the effects of the polarization of the light sources and optical components in the experiments. Finally, the theoretical curves for displacement vs. target-to-background power ratio, among others, are compared with the experimental results. Good agreement is demonstrated, and the causes of differences are discussed.