CATO (CAD Tool for Optical networks and interconnects) is a prototype tool for designing LANIMAN packet-switching optical communication systems. CATO is a knowledge based tool that integrates Artificial Intelligence (AI) techniques and event driven simulation, for optimizing system cost and performance. CATO provides the user with an Optical Device Library (ODL), that contains functional and cost characteristics of the optical devices that can be used to design the optical system. The tool also supplies a user friendly Graphical User Interface (GUI) module, which allows easy specification, evaluation and optimization of the communication system under investigation. Taking into account user defined performance requirements and operational constraints of the optical commUliication system, CATO searches for the optimal design solution, consisting of the network topology, and the set of devices that minimize the overall system cost. By combining the device library, with AI and event driven simulation, to the best of our knowledge CATO provides the first iterative and automatic optimization procedure for the design of optical communication systems.