Abstract: In order to compensate dispersion in an optical communication system, a single channel dispersion compensation system which used of dispersion compensating fiber was designed and simulated. The system was optimized by a fiber loop mirror so that it economized the cost, and the effect of dispersion compensation was fine. The simulation results such as Q factor and eye diagram were given and analyzed in this system with different velocity of 2.5Gbit/s and 10Gbit/s, and their input power were obtained. When the system's velocity is 2.5Gbit/s, the optimum input power is 13dBm, and Q factor is 172.88; When the system's velocity is 10Gbit/s, the input power is 6dBm and the corresponding Q factor is 45.96. The obtained results are helpful for the application of dispersion compensation in an optical communication system.