An optical signal receiver tracks local oscillator frequency offset (LOFO) and compensates for the phase distortion introduced in the received signals as a result of utilizing the local oscillator within a coherent detection scheme. This phase distortion is basically a constant phase rotation caused by the LOFO and implementation of the receiver using coherent detection and a digital interferometer instead of a conventional (yet complex) carrier phase estimation or recovery scheme. With an optical receiver implemented in this manner, the requirement of using a precise local oscillator laser with low frequency offset is less important.