Digital compensation of chromatic dispersion (CD) effect experienced by optical orthogonal frequency-division multiplexed (OFDM) signal in fiber transmission is provided in the frequency domain using a Fast Fourier Transform/Inverse Fast Fourier Transform (FFT/IFFT) pair with equal length of digital samples prior to OFDM receiver signal processing, wherein the equal length is larger than the length of a FFT used for OFDM subcarrier demultiplexing of the received signal. The OFDM signal processing is independent of fiber CD, so small guard-interval (GI) can still be used to achieve high spectral efficiency even under the experience of large CD. The GI need only to be large enough to accommodate other effects such as polarization-mode dispersion. The length of an IFFT used for OFDM subcarrier multiplexing, as well as the FFT for OFDM demultiplexing can be sufficiently small so subcarrier spacing is sufficiently large to tolerate typical frequency offsets between the transmitter laser and the optical local oscillator.