We have proposed and theoretically verified a 2R (reshaping and regeneration) limiter circuit using continuous wave (CW) holding beam for cross-gain modulation (XGM) wavelength converter, through simulation. The gain clamping effect of semiconductor optical amplifier (SOA), which is caused by CW holding beam injected into SOA, was used to obtain the accurate optical gain and phase conditions for SOA's in 2R limiter circuit. XGM wavelength converter with the proposed 2R limiter circuit provides higher extinction ratio (ER) as well as more enhanced operation speed than any other wavelength converter. Our numerical results show that after the wavelength-converted signal from XGM wavelength converter passed the 2R limiter circuit, it was re-inverted with the improved ER of 30 dB at 5 Gb/s. In case of high-speed operation, great enhancement to decrease power penalty of about 12 dB was shown at 10 Gb/s.