Theoretical modeling, analysis, and experimental investigation of effect of noise on an edge filter based ratiometric wavelength measurement system have been carried out. A basic noise model for a ratiometric wavelength measurement system which considers both optical and electrical noise is presented. The ratio response of the system has been theoretically modeled considering the limited signal-to-noise ratio (SNR) of source and noise of the receiver circuit and experimentally verified using a macrobend fiber edge filter based ratiometric system. It is shown both theoretically and experimentally that increasing the slope of the edge filter is not necessarily an efficient solution to increasing the resolution of the system and the effect of noise must be accounted for. The resolution of the system changes with wavelength, and an optimization of slope of the ratio of the system is necessary to determine the best possible resolution for a wider wavelength range. In the demonstrated example, we have shown that for systems with slopes of 0.16, 0.22, and 0.31 dB/nm, one can achieve 10-pm resolution for a range of 36, 22, and 16 nm, respectively, starting from 1500 nm in the presence of receiver noise at -10-dBm input power and with an optical signal SNR of 50 dB.