In accordance with the invention, an optical data transmission system of enhanced flexibility is provided by sub-band multiplexing of a WDM channel. Specifically, an exemplary optical data transmission system comprises an optical source for generating a plurality of frequency spaced optical tones within at least one WDM channel, a plurality of modulators for modulating the tones, and an optical transmission fiber for receiving and transmitting the modulated tones. An advantage of this system is that the tones are coherent. As a consequence, the need for guard bands is substantially reduced, and more flexible coding systems can be used to achieve a higher level of integration. For example, both amplitude and phase coding can be applied to the sub-band signals.