In this study, we investigated the performance improvement of a localized surface plasmon resonance (LSPR) biosensor by incorporating a metal–dielectric–metal (MDM) stack structure and subwavelength metallic nanograting. The numerical results showed that the LSPR substrate with a MDM stack can provide not only a better sensitivity by more than five times but also a notably improved signal quality. While the gold nanogratings on a gold film inevitably lead to a broad and shallow reflectance curve, the presence of a MDM stack can prevent propagating surface plasmons from interference by locally enhanced fields excited at the gold nanogratings, finally resulting in a strong and deep absorption band at resonance. Therefore, the proposed LSPR structure could potentially open a new possibility of enhanced detection for monitoring biomolecular interactions of very low molecular weights.