Previously, Chance and coworkers have demonstrated the use of time- resolved spectroscopy to detect changes in deoxy- and oxy-hemoglobin concentrations in brain, muscle, and tumors. In this study, we examine the potential to quantitate hemoglobin saturation and tissue oxygenation from steady-state, dual-wavelength measurements in the frequency domain. Frequency-resolved spectroscopy depends upon monitoring light which emerges a known distance away from an incident light beam whose intensity is sinusoidally modulated. The phase-shift, (theta), of the emergent light with respect to the incident light is related to the light pathlengths traveled due to the scattering and absorption properties of the homogeneous medium. Using the diffusion approximation to describe the transport of photons through a highly scattering medium, we demonstrate the ability to detect changes in absorption and scattering properties from measurements of (theta) in model system if Intralipid/India ink and polystyrene microsphere suspensions using phase modulation spectroscopy. In addition, from measurements of (theta) at wavelengths that straddle the isosbestic point of hemoglobin, we demonstrate the ability to quantitatively follow changes in of absorption properties due to oxy- and deoxy- hemoglobin in an Intralipid/hemoglobin model. The advantages of using phase-modulation spectroscopy as an analytical tool in the clinic as well as the remaining problems associated with its use are discussed.