In a bidirectional wavelength-reused system, polarization control is used to reduce power penalty induced by coherent mixing of the signal with Rayleigh backscattering. The reduction of the effect of Rayleigh backscattering is theoretical study and experimental demonstration. For a 50km, 10Gb/s bidirectional transmission system, an error floor of about 510-10 under the worst polarization state is occurred. Nevertheless, the power penalty is reduced from 3.5dB to only 0.3dB when the signals are under optimum polarization control. The results indicate that the proposed technique may find vast applications in bidirectional ring networks with add/drop as well as cross-connect nodes using wavelength-reused technology.