We propose a scheme for mitigating Rayleigh backscattering noise and demodulating differential phase-shift keying (DPSK) signals in wavelength-division-multiplexed passive optical networks (WDM-PONs) with injection-locked Fabry-Perot laser diodes (FP-LDs). Signal demodulation and wavelength conversion are simultaneously realized on the basis of the frequency deviation and red shift of longitude modes in the FP-LDs. Experimental results demonstrate that the demodulation and wavelength conversion of 2.5-Gb/s DPSK signals are achieved. A power penalty of about 1.6 dB at a bit error rate of 10-9 is measured after transmission over 25-km single mode fiber.