We investigate the optimum linewidth of the spectrum-sliced incoherent light (SSIL) source using a gain-saturated semiconductor optical amplifier (SOA) for the maximum capacity and longest transmission distance. For this purpose, we carry out experimental and simulation studies on the transmission performance of a 10-Gb/s on–off keying signal generated by using the SSIL source over a wide range of the SSIL linewidth. We find out that there are two windows of the linewidth for the high-speed operation of the SSIL source: ultra-narrow (i.e., linewidth $\ll$ receiver bandwidth) and very wide (i.e., linewidth $\gg$ receiver bandwidth). However, when the linewidth of the SSIL source is very wide, the 10-Gb/s signal generated by using this SSIL suffers severely from fiber chromatic dispersion and optical filtering. The simulation results are confirmed by experimental data measured by using an ultranarrow fiber Fabry–Perot filter (bandwidth = 700 MHz) and a bandwidth-tunable optical filter (bandwidth = 20 ∼ 53 GHz). Thus, we can conclude that the optimum linewidth of SSIL for capacity and transmission distance is ultranarrow. We also present a couple of drawbacks of the ultranarrow SSIL source, compared to the conventional wide-linewidth SSIL one, such as a large spectrum-slicing loss, a large SOA input power required for the suppression of excess intensity noise inherent in the incoherent light source, and the susceptibility to in-band crosstalk.