Optical Feedering between Base Stations and Control Station is an effective technique for future microcellular mobile communication systems. The use of Laser Diode (LD) in such a system leads to the generation of intermodulation products, which consequently affect a system performance and ultimately restrain the maximum number of users that the system can serve. The problem becomes further intensified in case of CDMA system which is a candidate for future cellular mobile and personal communication systems. In this paper LD's Nonlinearity compensation technique for Direct Sequence spread spectrum CDMA signals in optical communication system is presented. This technique involves the implementation of a nonlinear block herein after called Post Nonlinearity Recovery Block (PNRB). This block is designed to exhibit the characteristics inverse to those of LD. The block is designed theoretically by deriving the complete expressions for Transfer functions. Some useful results of theoretical investigation of a proposed scheme have been presented, which form the basis for the experimental test system. The work is novel because, (i) Compensation analysis has been carried out for DS-CDMA signals for the first time, and (ii) Compensation has been proposed on the control station instead of base station, which is different from the conventional techniques and offers several additional advantages. Performance of the system with and without PNRB is evaluated by Intermodulation Distortion (IMD) and SNR Analysis. The results show that LDs' nonlinearity distortion level can be compensated to a remarkable extent.