An all-optical combined serial-to-parallel and digital-to-analog convertor using standard WDM technology is realized. The system is based on bit interleaving and cross-gain modulation (XGM) in a semiconductor optical amplifier (SOA). The optical system can operate on multiple-bit digital words at a very high bit rate. The analog output forms series of pulses with the amplitude of each pulse taking one of the eight discrete values. A low pass filter may be used to turn this bit stream into a continuous waveform, and thus arbitrary waveforms are generated. Unlike many current digital-to-analog converter designs, which double in size with each additional bit, the design presented here allows a linear growth in components, thus making higher bit systems practical.