Significant advances have been made in the development of high-performance diode laser sources and photodiode detectors that will be essential for future optical signal processing systems. AIG aAs/G aAs diode lasers for 0.8 to 0.9 um wavelengths are now commercially available and GalnAsP/InP for 0.9 to 1.7µm should soon become available. Recent achievements include long lifetime lasers (>10,000 hours) in both materials systems, single longitudinal and transverse mode operation, high speed pulse modulation (1Gbit/sec), and mode-locked operation with <20 psec pulses. High performance avalanche photodiodes have been developed in Si for wavelengths up to 0.9 uM and modest-performance diodes in Ge up to 1.5 um. For wavelengths beyond 1 uM, III-V compounds, especially the GaInAsP/InP system, show promise for fast, highly sensitive diodes that could be integrated into optical waveguide circuits along with diode lasers.