Power penalties due to multipath interference have been measured for 1.7-Gb/s lightwave systems that use single-or multifrequency lasers. Systems that use single-frequency (SF) lasers potentially exhibit worse degradation than those using multifrequency (MF) lasers. Bit-error-rate (BER) floors only occur under the worse-case conditions of poor receiver margin and large multiple reflections. The use of optical isolation, to reduce laser feedback, is ineffective in reducing multipath interference (MPI), and in many cases may worsen the penalty. We show that for a typical transmission system, these degradations are reduced if optical interconnection reflections are maintained below -20.5 dB, commercially available connector return loss. Our experimental study is in good agreement with theoretical predictions using an analytic expression of the MPI noise power spectral density, and computer simulations using multimode laser rate equations. © 1990 IEEE