Using optical processing techniques, we experimentally enhance the physical layer security of optical communication systems. We exploit optical encryption using fiber nonlinearity to achieve real time data encryption. By implementing interleaved waveband switching modulation and variable two-code keying to the system, the security of the data is further enhanced. Based on spread spectrum, we also demonstrate optical steganography such that the stealth signal is transmitted underneath system noise. Optical steganography in WDM and optical CDMA systems is experimentally demonstrated. We also propose and study optical CDMA-based backup channels that improve service availability without wasting the bandwidth in the backup channel. The multi-layered security provided improves the confidentiality and availability of the network.© (2009) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.