The present invention provides a method and an FSK/IM receiver to solve the problem of burst-mode detection of frequency modulated labels on an ASK (or IM) payload. In accordance with one embodiment of the present invention, two FSK tones of an input FSK/IM optical signal are separated and communicated to a balanced detector. At the balanced detector, the two FSK tones are subtracted from each other and result in an AC-coupled data stream. The AC-coupled data stream is communicated to a Schmitt-trigger where the hysteresis of the Schmitt-trigger finally eliminates any residual ASK (or IM) payload in the recovered output data. The present invention provides both single channel and WDM solutions.