A cost-effective technique to monitor the performance of wavelength-division-multiplexed (WDM) channels in optical networks is presented. This process uses a blind signal separation (BSS) method based on higher-order statistics (HOS), and an optical-loop structure. The technique is illustratively demonstrated for four and eight 10-Gb/s channels spaced by 3.2-nm and 1.6-nm respectively. Relative to previously proposed methods for WDM-channel extraction, the HOS-based optical-loop procedure shows a reduced complexity, a better cost-efficiency, and an improved performance.