A low loss, wideband, compact, polarization-preserving fiber-optic directional coupler (PPFDC) has been developed for use in future coherent optical fiber transmission systems or gyroscopes. The PPFDC is made of two 200-pm-diameter sapphire ball lenses, a 3dB beam splitter, and four conical alumina-ceramic ferrules with flat reference planes to preserve polarization at the connection of the fibers. Built-in thermal stress change in the fiber is minimized because the fiber is polished only for the short length within the straight ferrule. The optical and mechanical axes are tilted, so cross-talk light from the fiber endfaces or lens surfaces is avoided. The optical directivity of the PPFDC is more than 50 dB, and return loss is more than 40 dB in the 1.3 kim wavelength region. The excess loss is less than 1 dB in the 1.2 to 1.4 Am wavelength range. The extinction ratio is more than 25 dB. The length of the coupling region of the PPFDC is about 1 mm including the two ball lenses and beam splitter. Spectral linewidths of a fiber-interfaced distributed-feedback (DFB) laser diode are measured by a delayed self-homodyne detection scheme, using the PPFDC. Experimental results of a novel polarization-preserving fiber-optic gyroscope using a phase-modulating PPFDC showed reasonable sensitivity and stability. These experimental results verified the above-mentioned characteristics of the PPFDC.