Abstract: A wavelength division multiplexing device and method includes two prisms having a pair of coated, highly reflective opposed faces forming an etalon. A volume phase grating is sandwiched between the two prisms. The volume phase grating is positioned between the highly reflective opposed face portions so that a light beam incident on the etalon undergoes a preselected number of multiple reflections between the highly reflective face portions and a preselected number of traversals through the volume diffraction grating, whereby wavelengths satisfying a Bragg condition on each traversal are diffracted out of the volume grating means. One prism may be designed to separate TE and TM polarized light, and the other prism may be designed to combine the TE and TM modes so that the result is polarization independent. Each prism includes at least one transparent output face through which the separately diffracted wavelengths are transmitted at respective angles.