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Summary form only given. We have proposed a novel optical orthogonal frequency division multiplexing technique that can overcome the spectral efficiency limitation of the conventional WDM system. This scheme permits substantial overlapping of the spectrum and can achieve the spectral efficiency up to 1 bit/s/Hz in principle. For demultiplexing, we used a newly developed optical discrete Fourier transformer (DFT) instead of electrical digital processing, which is impossible to apply in the optical frequency range. The optical DFT was realized by using a set of delay lines, a phase shifter and a coupler in the frequency domain and bit synchronization and an optical gate in the time domain. In experimental demonstration of this scheme, error-free operation was obtained with a 0.8 bit/s/Hz of spectral efficiency.