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Intermodulation noise in a frequency-division multiplex (FDM) system arises mainly from third-order nonlinearity in the repeater amplifiers. The way in which a biased semiconductor diode can be incorporated in the emitter feedback impedance of the output stage of each repeater so as to reduce this nonlinearity by compensation is described. It is shown that although it is not practicable to adjust the bias of each diode network for maximum compensation; a suitable standard bias that is used for all repeaters in the system can be chosen which will lead to the same result due to the statistical distribution in the phase of third-order intermodulation vectors from each repeater. The effects of transistor-diode-matching, group delay distortion and variation of compensation with output level, frequency, and temperature are discussed. It is concluded that in a practical 60-MHz system it should be possible to achieve a reduction of at least 6 dB in the third-order intermodulation noise in the worst channel.