The 40 Gbit/s WDM system has begun to be commercially deployed.Differential Quadrature Phase Shift Keying(DQPSK) has higher spectral efficiency and greater robustness to chromatic and polarization mode dispersion than On-Off Keying(OOK).Starting with the transmission performance requirements of the 40 Gbit/s WDM system
the paper analyzes the principle and implementation approach and verifies its transmission performances by accurate simulation.