Owing to Dense Wavelength Division Multiplexing (DWDM), over Tb/s transmission can be achieved in a single optical fiber. But up to now optics is mainly used for transmission, and signal processing mainly remains electronic, which requires opto-electronic (OEO) conversion in the switching node. All-optical signal processing offers significant advantages to optical transport networks, including protocol and format independence and substantial cost savings from reduced numbers of OEO interfaces.Differential phase-shift keying (DPSK) modulation are now attracting much interest because it offers increased spectral efficiency, relaxed dispersion management, and improved polarization mode dispersion (PMD) tolerance while maintaining direct-detection operation. Furthermore, the impact of fiber nonlinear effects may be reduced, which allows longer transmission distances with the same sensitivity performance at the receiver. However, DPSK DWDM systems suffer from self-phase modulation (SPM) induced nonlinear phase noise and cross-phase modulation (XPM) induced nonlinear phase noise.This dissertation aims to tackle several tough issues of optical signal processing, such as nonlinear phase noise in different phase shift keying systems, self-synchronization, header extraction and all-optical logic devices.The performance degradation of DQPSK WDM systems due to SPM- and XPM-induced nonlinear phase noise is evaluated in Chapter 2. The XPM-induced nonlinear phase noise is approximated as Gaussian distribution and summed together with the SPM-induced nonlinear phase noise. We demonstrate that 10-Gb/s systems, whose walkoff length is larger than 40-Gb/s systems’, are more sensitive to XPM-induced nonlinear phase noise than 40-Gb/s systems. Furthermore, DQPSK WDM systems show lower tolerance to both SPM- and XPM-induced nonlinear phase noises than DPSK WDM systems.In chapter 3, we show that when IP traffic is loaded directly over differential phase shift keying (DPSK) wavelength-division-multiplexed (WDM) systems with perfect dispersion compensation, the burstiness of IP packets has significant effects on the cross-phase modulation (XPM) induced nonlinear phase noise, and therefore exerts an influence on the packet-error probability performance of the systems. We show that a small IP traffic can reduce the XPM-induced nonlinear phase noise and therefore is beneficial for a low packet-error probability.A novel self-synchronization scheme utilizing a semiconductor optical amplifier (SOA) monolithically integrated with a delay interferometer (DI) is proposed and numerically demonstrated in Chapter 4. The proposed scheme is based on the fast gain saturation and relatively slow gain recovery of the SOA. With the properly chosen DI delay time, input pulse width and SOA carrier lifetime, input pulse energies as low as 100 fJ can be utilized to achieve a larger than 10 dB contrast ratio of the first to the other pulses of a transmitted packet.A novel header extraction scheme with semiconductor optical amplifier (SOA) delay interferometer (DI) configuration is proposed in Chapter 5. In the proposed scheme, the header is assumed to be encoded in 2.5Gb/s and inserted ahead of a 40Gb/s payload. With properly chosen SOA carrier lifetime, the header can be extracted from the incoming packet.In Chapter 6, the impact of the pattern effect on all-optical exclusive OR (XOR) gate based on modified SOA and Sagnac interferometer configuration is analyzed through numerical simulations. Two pseudorandom bit sequences (PRBSs), which can show the influence of the pattern effect are injected to the XOR gate for XOR operation. Simulation results indicate that the operation speed of the XOR gate is limited by the pattern effect