The effect of optical nonlinearities on the fiber transmission of differential polarization-phase-shift keying (DPolPSK) signals is analyzed. For single-channel transmission, the effect of self-phase modulation depends on the order of the DPolPSK. In dense wavelength-division multiplexing, the dominant nonlinear effect is cross-phase-modulation-induced polarization scattering, which exists even if there is no intensity noise. It is found that differential detection greatly reduces the effect of polarization scattering in DPolPSK. Unlike in conventional polarization-division-multiplexed intensity-modulated direct-detection systems, the effect of polarization scattering strongly depends on the channel spacing and bit rate.
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