An erbium-doped fiber laser system based on divided-pulse amplification and fiber nonlinear compression is demonstrated in this paper. The separation and combining of eight replicas are realized by polarization multiplexing with three length-multiplied YVO₄ crystals. The combining efficiency of the main-amplifier with different pulse widths is first investigated. Then, the amplified pulses are coupled into a single-mode polarization-maintaining fiber to be further compressed. The nonlinear compression process is optimized by controlling the pump power of the main-amplifier and the fiber length in the compressor, and the pulses with 55 fs temporal duration, 510 mW output power and 80.4 MHz repetition rate are generated. Furthermore, the frequency-doubled laser at 783.4 nm with 146 mW average power and 75 fs temporal duration is achieved using a 0.3-mm-length MgO…PPLN crystal, and the corresponding conversion efficiency is 31%.