Abstract: An apparatus and method for wavelength conversion of a signal, for example, a dual-polarization signal, is disclosed. The apparatus implements a single-loop counter-propagating wavelength conversion scheme which provides both up-conversion and down-conversion of the signal within the same loop. Nonlinear wavelength conversion devices in the loop provide both up-conversion and down-conversion of the polarization components of the signal within the loop depending on whether the polarization component travels through the nonlinear conversion device in a clockwise or a counter-clockwise direction. The wavelength-converted signal is available to be extracted from the wavelength-conversion loop. An all-optical wavelength-division multiplexing transponder based on the wavelength-conversion scheme is also disclosed.