A pretransmission compression and postdetection decompression scheme is proposed to reduce the clipping-induced nonlinear distortion (NLD) in subcarrier-multiplexed lightwave systems. In an AM-VSB CATV system, compression using a two-segment, piecewise-linear transfer characteristic promises to yield a 3.2-dB gain in carrier-to-noise ratio (CNR), or a 110% increase in the number of transmitted channels.