Polarization mode dispersion is considered to be one of the main obstacles for high speed long-haul optical fiber communication systems. It is necessary to realize PMD monitoring. This paper theoretically analyzed the principle of polarization mode dispersion monitoring with degree of polarization as monitoring signal. Using the degree of polarization method, the scheme of DSP based high precision real-time inline PMD monitoring is designed and implemented. An experiment system is set up to monitor polarization mode dispersion of 40Gbit/s DQPSK system. The experiment results show that the range of input optical power is -20~0dBm, the response time is 1μs and the states of polarization accuracy degree is 1%. It has high sensitivity and can be used in a variety of modulation formats and it is independent of optical signal rate.© (2010) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.