Optical integration of sensing and communication traffics is proposed. Time division multiplexed digital sensor signals are optically combined with communication traffic in an extended LAN environment. The composite signal is transmitted over a common optical fiber ring. The operational procedures of the integrated system and methods for signal separation and detection are explained. The degree of degradation of each traffic as a result of the spectral overlapping is analyzed and power penalties evaluated. It is shown that the communication traffic may be recovered with negligible power penalty employing direct detection techniques, whereas for the sensor traffic the power penalty may be minimized by the whitened matched filter detection. Under these conditions an optimum solution for system integration can be derived for the limiting case.