The next-generation passive optical network stage 2 (NG-PON2) effort was initiated by the full service access network (FSAN) in 2011 to investigate on upcoming technologies enabling a bandwidth increase beyond 10 Gb/s in the optical access network. The FSAN meeting in April 2012 selected the time- and wavelength-division multiplexed passive optical network (TWDM-PON) as a primary solution to NG-PON2. In this paper, we summarize the TWDM-PON research in FSAN by reviewing the basics of TWDM-PON and presenting the world's first full-system 40 Gb/s TWDM-PON prototype. After introducing the TWDM-PON architecture, we explore TWDM-PON wavelength plan options to meet the NG-PON2 requirements. TWDM-PON key technologies and their respective level of development are further discussed to investigate its feasibility and availability. The first full-system 40 Gb/s TWDM-PON prototype is demonstrated to provide 40 Gb/s downstream and 10 Gb/s upstream bandwidth. This full prototype system offers 38 dB power budget and supports 20 km distance with a 1:512 split ratio. It coexists with commercially deployed Gigabit PON (G-PON) and 10 Gigabit PON (XG-PON) systems. The operator-vendor joint test results testify that TWDM-PON is achievable by the reuse and integration of commercial devices and components.