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We have investigated and compared the performance of coherent detection of 12.5-Gb/s nonreturn-to-zero and return-to-zero binary phase-shift keying (BPSK) signals using LiNbO3 optical 90° hybrid with pulsed and continuous-wave local laser oscillator (LO). Our results showed that pulsed local oscillator provides at least 2-dB reduction in optical signal-to-noise ratio requirement. Increased eye opening and reduced bit-error ratio of the detected BPSK signal was observed using pulsed local oscillator. Pulsed local oscillator also provides pulse-shaping capability that reduces signal pulse-broadening penalty. Our simulation results agreed well with experiment and predicted that for a given signal and receiver bandwidth there is an optimal LO pulsewidth which gives maximum eye opening.