We present a coupled-mode theory of fiber-optic add-drop filters, which involve directional coupling between two fibers combined with fiber Bragg gratings defined inside the coupling region. The analysis self-consistently accounts for both the directional and the reflection coupling, and the propagation constants and structure of the supermodes of the combined structure are derived. We present a detailed analysis of a filter design based on identical fibers. The calculated device parameters satisfy the requirements for dense wavelength-division multiplexing applications. (C) 1997 Optical Society of America.