Proposed is a method of decoding a differentially encoded PSK modulated optical data signal carrying FEC encoded data values. The optical signal is corrected by an estimated phase offset. From the corrected signal, respective likelihood values for the FEC encoded data values are derived, using an estimation algorithm which accounts for a differential encoding rule used for differentially encoding the optical signal. The derived likelihood values are limited to a predetermined range of values. From the limited likelihood values, FEC decoded data values are derived, using an algorithm which accounts for a FEC encoding rule used for FEC encoding the FEC encoded data values.