Optical code division multiple access (OCDMA) technique is required to meet the increased demand for high speed, large capacity communications in optical networks. This technique allows multiple users to share the same optical fiber bandwidth. This thesis addresses theoretically some issues related to IP-based OCDMA networks and identifies the main parameters affecting their transmission performance. New prime code, namely advanced enhanced-modified prime code (AEMPC), is proposed to enhance the performance of IP-based OCDMA networks. The code is simply generated by applying many steps of padding for the conventional prime code. The length and weight of the proposed code are equal to (P2+5P) and (P+5), respectively, where P is a prime number used to generate the code. These values are to be compared with P2 and P, respectively, for a modified prime code (MPC) reported in the literature. The numerical results show that the proposed code increases the network security, and reduces the multiuser interference without affecting the optical receiver sensitivity. The transmission performance of a spectral amplitude coding (SAC)- OCDMA network is simulated when a conventional single mode fiber (SMF) is used as the transmission link. The results can be used as a guideline to assess the effect of various parameters on network performance. Simulation results reveal that the transmission distance is limited mainly by the fiber dispersion when high coding chip rate is used. For a three-user SAC-OCDMA network operating at 1550 nm wavelength with 200 Mb/s data rate and 10 Gchip/s chip rate a complete analysis were done and displayed in chapter four, the maximum allowable transmission distance for a bit error rate (BER) < 10-9 is about 30 km and it has been improved to 120 km when optical amplification and dispersion compensation are absent and present, respectively. These results were obtained using Optisystem (version 7) software from Optiwave, see appendix A.