A low cost, compact optical transceiver has been designed for emerging FDDI and Fiber Channel Local Area Networks (LANs). This transceiver has been designed to meet the growing volumes and rapidly falling prices in the FDDI marketplace. The package is designed to be fully compliant with an industry standard package outline and footprint. This optical data link (ODL) contains a duplex SC connector receptacle -compatible with the ANSI Fiber Channel and low cost FDDI standards. With a single row of 9 pins, the transceiver will occupy less than 1.0 square inch of board space.This ODL transceiver has been designed using two step overmold packaging technology. This technology integrates optical and electrical components in a single, sealed, transfer molded package. This package design uses copper based leadframe to provide low cost interconnection and mass handling. The final assembly sequence was conceived using the latest Design for Simplicity (DFS) principles. This paper will describe the design concept and challenges required to implement a full transceiver in such a small size. Thermal analysis results will be discussed. Electrical design issues such as cross-talk and extemal noise immunity will also be described. Initial performance results using preliminary design models will be reported.