This paper proposes a fault tolerant optical crossconnect (FTOXC) which can tolerate link, channel, and internal optical switch failures via spare optical channels, extra input/output (I/O) ports for an optical switch, and associated wavelength converters. It also proposes a fault tolerant wavelength routing algorithm (FTWRA) which is used in the normal and the restored state. The FTOXC and FTWRA can be applied to any all-optical network and can recover many types of failures. FTOXC can configure the number of working and spare channels in each output link based on the traffic demand. Two formulations in this paper can be used to determine the optimal settings of channels. A global optimal setting of working and spare channels in each link can be found by formulating the problem as an integer linear program (ILP). In addition, the number of working and spare channels in each link can be dynamically adjusted according to the traffic loads and the system reliability requirements. The tradeoff between these two conflicting objectives is analyzed by the Markov decision process (MDP).