A novel design of wavelength-division multiplexer based on two-mode interference assisted by a highly dispersive grating structure is two-dimensionally simulated and analyzed using finite-difference time-domain method. We show that the designed grating waveguide provides a mode-dependent reflection spectrum which can be used to modify the beat lengths of the two selected wavelengths 1342 and 1560 nm, so that they can be divided in a very short distance about 48 μm. Simulation results show that contrasts /spl sim/12 dB and insertion losses about 2 dB could be achieved.