A tunable PLC optical filter having sequentially connected thermally tunable Mach-Zehnder (MZ) interferometers is described. The MZ interferometers, having free spectral ranges matching ITU frequency grid spacing, are tuned so as to have a common passband centered on the frequency of the signal being selected, while having at least one of the stopbands centered on any other ITU frequency. Any other optical channel that may be present at any other ITU frequency is suppressed as a result. The PLC chip, including a zero-dispersion lattice-filter interleaver stage, a switchable fine-resolution stage and, or a retroreflector for double passing the filter, is packaged into a hot-pluggable XFP transceiver package. A compensation heater is used to keep constant the amount of heat applied to the PLC chip inside the XFP package, so as to lessen temperature variations upon tuning of the PLC optical filter.