An adaptive laser diode driver capable of driving various laser diode types as well different laser diodes from the same type, while ensuring optimal optical performance over the lifetime and temperature change of the diode. The driver adaptively changes the voltage level of input data signals to achieve full current switching as well as short rise time (t.sub.r) and fall time (t.sub.f) in extreme modulation conditions. This is preformed by constantly monitoring the output signal of a laser diode. Based on the monitored signal a modulation current is adjusted and in response the low level and high level of the input data signals are set. In accordance with one embodiment, the adaptive laser diode driver can be integrated in an optical line terminal (OLT) or an optical network unit (ONU) of a passive optical network (PON).