An optical receiver and a method of demodulating an optical signal. The method includes combining a received optical signal with a local oscillator signal to construct a complex signal indicative of an optical field of the modulated optical signal and processing the complex signal recursively under control of a Kalman filter that enforces a constraint. The receiver includes an optical hybrid that combines a received optical signal with a local oscillator signal, a detector that recovers components of a complex signal, a processor that receives these components, and instructions that cause the processor to process the components of the complex signal recursively under control of a Kalman filter that enforces a constraint to recover data.