In direct-detection OFDM systems, the nonlinear effects caused by optical modulation and fiber transmission can degrade the system performance severely. In this study, we propose a new nonlinear companding transform to improve the performance of direct detection optical OFDM transmission systems. The demonstration is realized by Monte-Carlo simulation of the intensity modulation and direct-detection DCO-OFDM optical transmission system at 40 Gbps over a 80 km of standard single mode fiber link. The influence of the companding parameters on the performance of system in different nonlinear transmission conditions has been investigated via simulation.