The thesis studies performance monitoring for the next generation optical networks. The focus is on all-optical networks with bit-rates of 10 Gb/s or above. Next generation all-optical networks offer large challenges as the optical transmitted distance increases and the occurrence of electrical-optical-electrical regeneration points decreases. This thesis evaluates the impact of signal degrading effects that are becoming of increasing concern in all-optical high-speed networks due to all-optical switching and higher bit-rates. Especially group-velocity-dispersion (GVD) and a number of nonlinear effects will require enhanced attention to avoid signal degradations. The requirements for optical performance monitoring features are discussed, and the thesis evaluates the advantages and necessity of increasing the level of performance monitoring parameters in the physical layer. In particular, methods for optical-signal-to-noise-ratio (OSNR) monitoring, GVD monitoring, all-optical bit parity calculations, and signal quality optimization are proposed.