All-optical wavelength conversion based on cross-gain modulation (XGM) using semiconductor optical amplifiers (SOA’s) is attractive because of its high-speed, simple configuration, wide operation wavelength range, and large optical gain capability. In this paper, first, operation principle of XGM and the wavelength conversion performance are described analytically and experimentally. It is pointed out that the dominant factor for operation speed is carrier recovery time when the input signal turns from 1 level to 0 level. Next, the investigation of optimized condition for XGM in terms of power penalty are explained. The optimized condition for minimizing the power penalty results from the degradation of the extinction ratio at small signal power and the slow carrier recovery time at high signal power. Then, application to an all-optical regeneration system using XGM is presented. The improvement of received power is realized by a cross-gain modulation-type wavelength converter-cascaded optical regenerator (CGCOR).