An optical IQ demodulator that does not require a power-consuming DSP is disclosed. A DC offset is added to one of the I and Q optical signal components at an IQ transmitter. After mixing with an LO signal and differential detection at the receiver, this DC offset results in a heterodyne-frequency tone in each of the quadrature detection channels of the receiver. The phase of this oscillation is recovered using a PLL circuit, which output is used to separate the transmitter I and Q channels for decoding thereof using conventional electronics.