A novel scheme to compress optical pulses is proposed and demonstrated numerically, which is based on a nonlinear optical loop mirror constructed from dispersion decreasing fiber (DDF). We show that, in contrast to the conventional soliton-effect pulse compression in which compressed pulses are always accompanied by pedestals and frequency chirps owning to nonlinear effects, the proposed scheme can completely suppress pulse pedestals and frequency chirps. Unlike the adiabatic compression technique in which DDF length must increase exponentially with input pulsewidth, the proposed scheme does not require adiabatic condition and therefore can be used to compress long pulses by using reasonable fiber lengths. For input pulses with peak powers higher than a threshold value, the compressed pulses can propagate like fundamental solitons. Furthermore, the scheme is fairly insensitive to small variations in the loop length and is more robust to higher-order nonlinear effects and initial frequency chirps than the adiabatic compression technique.