A label swapping scheme of an optical labeled signal with differential phase shift keying (DPSK) for label at 2.5 Gb/s and pulse position modulation (PPM) for payload at 40 Gb/s is demonstrated by simulation. Power penalties of ?1.8 and ?0.8 dB are achieved for both the payload and label over 80-km single mode fiber (SMF) transmission. This labeling scheme allows the use of four-wave mixing (FWM) in semiconductor optical amplifier (SOA) to perform label erasure, with advantages of transparence for bit rate, high processing rate, simple architecture, and low cost. Label swapping is demonstrated with appropriate penalties of ?3.5 and 0.8 dB for PPM payload and new DPSK label, respectively. To further prove the effectiveness of the proposed scheme, label swapping in the case of using 10-Gb/s DPSK label is also investigated with the power penalties of 6 and 2 dB for PPM payload and new DPSK label.