An optical differential phase shift key (DPSK) receiver, a method of demodulating an optical DPSK modulated signal and an optical processor capable of operating as either a DPSK receiver or DPSK transmitter. In one embodiment, the DPSK receiver includes: (1) an optical waveguide and a delay line associated therewith configured to receive simultaneously an optical DPSK modulated signal, (2) a coupler having at least two inputs and at least four outputs, the at least two inputs configured to terminate the optical waveguide and the delay line, the delay line having a path length difference that delays the optical DPSK modulated signal by at least one timeslot relative to the optical waveguide and (3) photodetectors associated with the at least four outputs and configured to provide signals indicative of digital data contained in components of the optical DPSK modulated signal.