-The effect of dispersion on a spectrum-sliced WDM (SS-WDM) system with an optical preamplifier receiver is investigated for the first time. A theoretical model based on the statistics of both the incoherent source emission and the fiber dispersion is developed and used to obtain the bit error rate (BER). This model improves understanding of the spectral slicing method in a realistic situation where dispersion significantly impacts the transmission prior to arrival at the optical preamplifier. The optically preamplified receiver delivers a system of 2.5Gbps with at least twice the transmission capacity of a one with a pin diode receiver. This arises because the optimum slice width is decreased to ~0.3 nm allowing over 110 WDM channels. As a further benefit, a sensitivity improvement of 8.75 dB offers a superior power budget in comparison with the pin diode receiver, and the power efficiency can be improved by over 8dB. The results are obtained using the saddlepoint approximation and compared to the customary Gaussian approximation. The latter is found to be reasonably accurate in predicting the optimum bandwidth but conservative in sensitivity predictions.