A multiband direct-detected optical orthogonal frequency-division multiplexing (DDO-OFDM) system effectively enhance data capacity without high-end electrical devices. However, signals are optical-to-electrically converted with only one photodetector in a direct detecting scheme, signal–signal beating interference (SSBI) is meanwhile introduced. Traditionally, a large guard band can be applied to evade SSBI, however, it seriously restricts the precious spectral efficiency (SE). In this letter, we propose an iterative digital signal processing (DSP) in the receiving end of a multiband DDO-OFDM system to cope with the SSBI. With this iterative DSP, the corresponding SE theoretically approach to that of single polarization coherent optical OFDM systems. A total 65.4-Gb/s data rate is experimentally demonstrated with a three-band DDO-OFDM signal in 16-QAM format, and the SSBI reduction DSP saturates within two iterations. Various bandgaps and carrier-to-signal power ratios settings are also evaluated to investigate the feasibility of the proposed iterative DSP.