Abstract: This invention provides a compact delay-line interferometer that can be used in Differential Phase Shift Keying (DPSK) and Differential Quardratic Phase Shift Keying (DQPSK) demodulators. The delay-line interferometer is based on polarization components including beam shifter, beam splitter and wave plates. The realized demodulators can be used as either discrete components or integrated with balanced detectors. Time delay generated in the interferometer can be controlled with a phase shifter, using either thermal, piezoelectric, mechanical of electrical means. This application claims priority to US Provisional Patent Application Ser. No. 61/238,687, filed Sep. 1, 2009, titled “Polarization Based Interferometer.” This application also claims priority to US Provisional Patent Application Ser. No. 61/295,766, filed Jan. 18, 2010, titled “Delay-Line-Interferometer for Integration with Balanced Receivers.