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We show that spectral inversion can be employed for regeneration to reduce the effect of phase noise (Gordon-Mollenauer phase noise) in a nonreturn-to-zero differential phase-shift-keying based transmission system. Several locations of the spectral inverter in an eight-span transmission link have been investigated. We show that the best results are obtained when the spectral inverter is placed in the middle of the link. Compared to the transmission system without spectral inverter, an improvement of over four decades in bit-error-rate performance is achieved.