This paper describes Inter-frame Ling Signaling (ILS) protocol technology and its implementation in a 10-Gigabit Ethernet (10GbE) physical layer (PHY) LSI and optical transceiver module. The ILS can realize SDH/SONET-compatible operations, administration, maintenance, and provisioning (OAM&P) functions for PHY of 10GbE networks by inserting OAM&P information in the inter-frame gap periods. The coding features include 10GbE PHY upper compatibility, error detection capability, and disparity neutral characteristics. The 10GbE PHY LSI with the ILS function was fabricated using 0.18-um SOI CMOS technology to achieve high-speed and low-power performance. The main features of the high-speed circuit design are an inductive-load buffer, high-speed clock and data recovery (CDR), and pre-emphasis/equalizer circuits. The LSI function meets IEEE 802.3ae specifications with the very low-power consumption of about 1.2W. An XENPAK transceiver with ILS function using the LSI was also fabricated to make it easy to implement the ILS function in optical transport network systems such as WDM, OADM, OXC systems and L2/L3 switches. The key features of the module include a 1.3-um DFB laser module with highly reliable transmission performance and a small EML driver integrated module. ILS protocol operation is verified by experiment with XENPAK modules emulating the optical transport system.