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A novel flat-top and low-dispersion optical interleaver using ring cavities (RCs) in a Mach-Zehnder interferometer (MZI) is proposed. It is composed of eight mirrors and two nested prism pairs. Each prism and the two mirrors behave as a RC. Phase shift of RC is a periodic function of the frequency of the input light which acts as a phase dispersive mirror. The two phase shifts needed to achieve a flat-top spectral passband are provided by Fresnel reflectivities at the prism-air interface of the two RCs. The optimum interface reflectivities for flat passband, high isolation and low dispersion can be obtained only by choosing an appropriate material for the prism in each RC. The proposed interleaver in a 25 GHz channel spacing application exhibits a 0.5 dB passband greater than 24 GHz (96% of the spacing), a 30 dB stopband greater than 21.2 GHz (84.8% of the spacing), a channel isolation higher than 32 dB and chromatic dispersion ±50 ps/nm within the range of center-frequency ±2 GHz ITU passband.