An optimizing method of main structure parameters (e. g.,the thickness of the crystal) and writing conditions (e. g.,the incident angle) is presented for a holographic grating wavelength division demultiplexer based on photorefractive LiNbO₃ crystals. The key performance parameters of the demultiplexer,such as the loss and the polarization dependent loss (PDL),are optimized by selecting favourite structure parameters using a rigorous coupled wave analysis method. Numerical results show that a low loss and a low PDL can be achieved by using the optimal crystal thickness and incident angle. The designed demultiplexer obtains the favourite synthetical performance for an actual application. The experimental method of the grating recorded is also introduced in the present paper. The experimental results accorded with theoretical computation commendably by testing the three different specimens.