Abstract This paper addresses the reduction of peak-to-average power ratio (PAPR) in optical filter bank multicarrier (FBMC) with offset quadrature amplitude modulation (OQAM) using a fast Hadamard transform (FHT) centered partial transmit sequence (PTS) algorithm. High PAPR in FBMC-OQAM systems can cause non-linear distortions in optical transmitters, such as LEDs, leading to signal degradation. The proposed FHT-PTS algorithm effectively mitigates this issue by dividing the data symbols into disjoint subsets, applying phase rotations, and performing inverse FHT to generate multiple candidate sequences. The sequence with the lowest PAPR is selected for transmission. This technique ensures significant PAPR reduction while maintaining acceptable bit error rate (BER) performance. Simulation results demonstrate that the FHT-PTS algorithm achieves substantial PAPR reduction gain of 3 dB–6 dB compared to conventional PTS and other existing methods. The power spectrum density (PSD) analysis shows that the spectral efficiency of the FBMC-OQAM system is preserved, with minimal out-of-band emissions. The FHT operations significantly reduce the complexity compared to traditional Fourier transform-based methods, making the algorithm more feasible for real-time applications.