Wavelength division multiplexing is a type of multiplexing technique which allows data from different sources to be transmitted over a single link at same time whereas each data channel is carried on its own unique wavelength. Dense WDM is evolved from WDM where channel spacing is less than or equal to 100 GHz. But, their performance is limited by various non-linear effects which are caused because refractive index of fiber depends upon the intensity of optical power. Four wave mixing is a nonlinear process that generates new frequency components from the existing frequency components. Also, it degrades the system performance, so this has to be minimized. Hybrid modulation techniques are used to suppress FWM. In this paper, the best hybrid modulation technique has been discussed in 2.5 Gbps 8-channel DWDM system for suppression of four wave mixing. The technique is named as intermediate level reduction scheme. The channels are spaced at 50 GHz. Intermediate level reduction scheme has been analysed at different distances varying from 50 Km to 125 Km at different input power levels varying from -15 dBm to 15 dBm. The results are based upon the eye diagram and Q factor.