The phase squeezing property of phase sensitive amplifiers (PSAs) is a useful feature to recover signal quality. Chromatic dispersion of transmission fiber largely affects the performance of PSAs when they are used as in-line amplifiers in long-haul transmission systems. In this work, we demonstrated that phase variation such as chirping can be reduced by phase squeezing in a periodically poled LiNbO3 (PPLN)-based PSA. We also examined the dispersion tolerance of a PPLN-based in-line PSA. Theoretical analysis and experiment revealed that we can relay the received data with negligible power penalty utilizing the phase squeezing capability of the PSA, if the phase variation due to dispersion within the data bandwidth is below π/2.