We report new experiments that test quantum dynamical predictions of polarization squeezing for ultrashort photonic pulses in a birefringent fiber, including all relevant dissipative effects. This exponentially complex many-body problem is solved by means of a stochastic phase-space method. The squeezing is calculated and compared to experimental data, resulting in excellent quantitative agreement. From the simulations, we identify the physical limits to quantum noise reduction in optical fibers. The research represents a significant experimental test of first-principles time-domain quantum dynamics in a onedimensional interacting Bose gas coupled to dissipative reservoirs. DOI: 10.1103/PhysRevLett.97.023606 PACS numbers: 42.50.Lc, 42.50.Dv, 42.65.Dr, 42.81.Dp The nonlinear optical response of standard communications fiber provides a straightforward and robust method [1] for squeezing the quantum noise always present in laser light to below the vacuum noise level. This feature allows us to design quantum dynamical experiments [2,3] operating in a very nonclassical regime where highly entangled states can be readily produced, even in many-body regimes involving 10 8 interacting particles. The squeezing is sensitive to photon-photon interactions, as well as to additional dissipative and thermal effects [4]. Such complications have affected all prior experiments and have so far prevented quantitative agreement between theory and experiment.Here we report on quantitative comparisons of firstprinciples simulations with experimental measurements on the propagation of quantum states in optical fiber. The excellent agreement, over a wide range of initial conditions, is unprecedented for direct predictions from ab initio treatments of many-body quantum time evolution. The approach we use has potential applications in many other areas of science, especially to dynamical experiments with ultracold atoms and nanotechnology.Photons in a nonlinear fiber are an implementation of the famous one-dimensional attractive Bose-gas model [5]. Fiber squeezing experiments thus provide a substantial opportunity to carry out an experimental test of the predictions of many-body quantum mechanics for dynamical time evolution. Such a test requires the same ingredients as did Galileo's famous tests of classical dynamics using an inclined plane [6]: one needs a known initial condition, a well-defined cause of dynamical evolution, and accurate measurements. All of these essential features are present in our experiments. The initial condition is a coherent [7] photonic state provided by a well-stabilized pulsed laser. The Kerr nonlinearity in silica fiber corresponds to a localized (delta-function) interaction between the photons [8]. Quantum-limited phase-sensitive measurements have been developed in optics that detect quantum fluctuations at well below the vacuum noise level [9,10].Even though the simplest model of a 1D interacting Bose gas has exactly soluble energy eigenvalues, the many-body initial-value problem still remains intractab...