Orthogonal frequency division multiplexing (OFDM) belongs to multicarrier technology which is used in many broadband wired and wireless communication systems. It is used to combat multipath fading. Although, OFDM systems are complex compared to single carrier systems due to design of their transmitter and receiver and also the associated signal processing, significant benefits are achieved. Optical OFDM systems can be classified into three approaches according to the detection scheme. The approaches are direct detection optical OFDM (DDO-OFDM), coherent optical OFDM (CO-OFDM) and self coherent optical OFDM (SCO-OFDM). The most important drawbacks of CO-OFDM are the high peak-to-average power ratio (PAPR), high sensitivity to frequency offset and phase noise. The present dissertation introduces the performance of different pulse shaping techniques. Furthermore, it presents new algorithms to reduce the phase noise effects and compares the system performance with different existing algorithms. Moreover, the performance of a new system design is investigated. The provided dissertation includes four original contributions.Initially, the theoretical principles of OFDM are presented with detailing on the advantages and disadvantages of OFDM compared to the single carrier modulation technology. The theoretical fundamentals of optical OFDM and the differences between the three systems are followed. Furthermore, performance of the three existing optical OFDM systems are elaborated and compared. A square root raised-cosine pulse shaping of OFDM symbols is suggested to enhance the efficiency of CO-OFDM systems. Next, the different kinds of the phase noise effects on the OFDM signals are defined and the impact of the laser and nonlinear phase noise is reported. Different existing phase noise compensation algorithms are presented. Moreover, the modified and new phase noise compensation schemes are provided and compared.