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We demonstrate a novel fiber-based in-line DPSK demodulator using an in-fiber Mach-Zehnder interferometer (MZI). The device is fabricated by mismatch splicing of a photonic crystal fiber (PCF) with standard single mode fibers. The spectral characteristics at different PCF lengths are analyzed. The envelope of the interference fringes show a period that is inversely proportional to the PCF length, and is attributed to the periodic coupling between the core mode and the cladding mode. Error free demodulations of 10-Gb/s RZ- and NRZ-DPSK signals have been demonstrated using the in-fiber PCF-MZI demodulator with only 3-m PCF to introduce 91-ps delay. Wideband DPSK demodulation has also been achieved.