A 1.3 µm DFB-LD module was developed for multi-channel AM transmission systems. The relationships between laser characteristics and carrier to noise ratio (CNR), composite second order distortion (CSO) and composite triple beat (CTB) in 42-channel analog AM transmission experiments using a 15km single-mode fiber were investigated. To achieve a CSO value lower than --62dBc the laser l-L curve linearity should be less than 5%. The relation between CSO and the number of second order intermodulation products was theoretically and experimentally investigated. To achieve a CNR bigger than 52dB (4MHz), the relative intensity noise (RIN) value of the laser should be less than --155dB/Hz as predicted in a theoretical model. The lowest CSO and CTB values were obtained by optimizing the laser bias current at a certain modulation depth. There was a trade-off between CSO, CTB and CNR in optimizing the laser bias current and modulation depth.