The chief objective of this paper is to develop a fundamental understanding of the effects of laser phase noise on the performance of coherent lightwave communication systems. A comprehensive treatment applicable to a wide variety of coherent receiver designs under a broad range of conditions is provided. Our models and analytical tools are developed in sufficient detail to encompass a broad range of applications. Formulas are derived for the bit error rate in homodyne and heterodyne Phase Shift Keying (PSK), Differential Phase Shift Keying (DPSK), Frequency Shift Keying (FSK) and on‐off keying. Estimates are provided of the penalties accrued due to phase noise. Based on detailed mathematical analysis and estimates, we made several findings. Near quantum‐limited receiver sensitivity can be achieved with PSK using homodyne detection only at signaling rates 3000 times greater than the laser linewidth. A receiver sensitivity 3 to 6 decibels poorer than the quantum limit can be achieved with heterodyne rather than homodyne detection. DPSK, for example, can operate at rates only 300 times greater than the laser linewidth. At lower rates, FSK is an attractive candidate. It can be designed to be extremely tolerant of phase noise by using wide frequency deviations.