A laser diode driver with means for adjusting the compliance voltage to allow a current source to accurately reproduce a current command while simultaneously minimizing the power dissipation of the current source. For a slowly-varying or DC current command, the compliance voltage is continuously adjusted to limit the power dissipation of the current source to below a predetermined minimum. For a pulsed current waveform, the compliance voltage is maximized during periods of zero or low current demand so that sufficient energy is stored to faithfully reproduce the leading edge of a pulsed current command, and reduced during the plateau portion of a pulsed current command to minimize the power dissipation of the current source.