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This work presents an experimental and theoretical study on the improvements to pulsed diode laser gain-switched (GS) optical sources. Simultaneous compression and reshaping of the limited quality pulses obtained with this technique are reported using a highly nonlinear optical loop mirror (HNOLM) directly coupled to the diode laser source, without any previous pulse conditioning. The HNOLM is based on the use of a microstructured optical fiber and a highly nonlinear semiconductor optical amplifier; it is compact and offers benefits in terms of reduced system complexity. The experimental observations are compared to a theoretical model of the system, and excellent agreement is observed.