In a PON system with WDM, at the time of initial setting, each ONU negotiates with an OLT, and automatically acquires a wavelength which can be used by the ONU. One wavelength for negotiation of assigned wavelength is fixed as a default, and a newly connected ONU first uses the wavelength. The OLT 200 includes a plurality of light sources for downstream communication. The ONU 300 includes a wavelength variable filter selectively receiving one of wavelengths of downstream communication, and a wavelength variable light source selectively emitting light of one of plural wavelengths for upstream communication. The ONU 300 uses a transmission wavelength (for example, λu32) for negotiation and transmits a wavelength assignment request 1000 to the OLT 200. The OLT 200 selects a wavelength λu1 to be assigned from unused wavelengths, and transmits wavelength information to the ONU 300. The OLT 200 and the ONU 300 communicates using the notified wavelengths.