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The Inter-Carrier Interference (ICI) compensation for Coherent Optical Orthogonal Frequency Division Multiplexing (CO-OFDM) system has been studied in this paper. The purpose behind is to investigate the presence of ICI due to the impact of Laser Phase Noise (LPN) and Fiber Non-Linearity (FNL). Thereby, we propose a simple clipping scheme which represents an effective distortion algorithm to decrease the Peak to Average Power Ratio (PAPR) for 4QAM system. The method exhibits a significant process on ICI cancellation in CO-OFDM system. The OFDM signal is basically transmitted along 550km distance rated at 10Gbps single mode fiber for the coherent optical mode. The new findings show that the receiver sensitivity is highly improved below 10 ^-3 FEC for laser power 5dBm; and archives about 1dBm to 2.4dBm when laser power becomes 8dBm at a typical clipping ratio of 0.6. In particular, the system …