A DPSK demodulator is implemented in Sagnac interferometer configuration with a delay line element introduced in one or both of the optical paths of the transmitted and reflected beams. Because the two reflected and transmitted beams travel on the same optical path (though in opposite directions), the Sagnac interferometer provides all the advantages of a common-path interferometer, is thermally and mechanically stable, and the phase requirements are greatly reduced. In its simplest form, the Sagnac DPSK demodulator. In the preferred embodiment, the beam-splitting surface and one of the mirrors are combined into a rhomb beam-splitter structure and the other two mirrors into a right-angle prism. In a DQPSK embodiment, the input beam is split by an upfront beam splitter into two parallel beams that are then directed toward the rhomb-beam-splitter/right-angle-prism combination of the invention.