Abstract In this paper, the cost effective bi-directional passive optical network architecture with wavelength remodulated scheme is investigated. To realize the cost-effective PON, remodulation scheme is used, in which the downstream optical signal is reused as a carrier for the upstream transmission as it eliminates the need for an extra laser source at optical network units. The performance of proposed passive optical network is analyzed and compared for various modulation formats such as Non Return to Zero (NRZ), Return to Zero (RZ) and On–Off Keying (OOK) with 64 optical networks units (ONUs) at different traffic speed for downlink and uplink, respectively. It has been observed that the most suitable data format for proposed PON network is NRZ. Further the proposed system performance is compared with the current state-of-the-art PON architectures.