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We report a new configuration of tunable optical filter for DWDM applications. In this design, first-order diffracted signal light by a grating is directed to a lens and focused on to a transmission-type liquid crystal spatial light modulator (LC_SLM). Wavelength channels are selected by opening the appropriate pixels of the LC-SLM for transmission. The device is demonstrated by using a broad-band AR-coated laser diode (lamda = 800 nm) as the signal light. For conceptual demonstration, we use optical fibers with a core diameter of 50 microns instead of the LC-SLM. A total of 37 channels, spanning 33.6 nm were successfully selected with channel spacing of 0.94 nm and bandwidth of 0.4 nm. With 100 micron-wide pixels separated by 5 microns in the LC-SLM and a 1800 lines/mm grating, we show selection of five channels with channel spacing of 0. 78 nm. The bandwidth is 0.43 nm. The channel isolation is better than 20 dB. At a wavelength of 1.5 micron, channel spacing as small as 12.4 GHz can be realized. This device is also expected to be useful for other DWDM applications, e.g., switching and routing.