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In this paper a novel combination of time domain and frequency domain analysis of optical waveguides using the method of lines and the discrete Fourier transform is presented. The hybrid algorithm is applied to propagation analysis in multimode optical waveguides. In extension of the existing method of lines analysis in the literature the algorithm allows the inclusion of time dependent effects, e.g. pulse broadening , incoherent optical sources with finite spectrum , time interference of modes and noise into the propagation analysis of optical waveguides. By using a combination of discrete Fourier transform and the method of lines an efficient algorithm is achieved which is ideally suited to the analysis of time periodic optical pulse propagation in long waveguide structures. Thus the analysis of time dependent pulse propagation in multimode waveguide structures with lengths up to kilometers and with more than thousand modes can be done on a standard personal computer.