The propagating beam method is used to carry out a fully three-dimensional analysis of a nonlinear optical waveguide and a directional coupler formed from a pair of nonlinear waveguides. It is shown that, for interesting levels of the index nonlinearity, a beam in a monomode waveguide can undergo mild self-focusing and self-phase modulation. The behavior or the nonlinear coupler, on the other hand, is quantitatively similar to that predicted by coupled-mode theory. On the basis of the calculated power transfer characteristics of the nonlinear coupler, three schemes for using the device as a switch have been proposed. It is found that one of these, which is based on the operation of the coupler at a power close to the critical power, permits a larger power to be switched by a very small one.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">></ETX>