We investigate the optimum linewidth of the spect rum-sliced incoherent light (SSIL) source using a gain-saturated semiconductor optical amplifier (SOA) for the maximum capacity and longest transmission distance. For this purpose, we carry out experimental and simulation studies on the transmission performance of a 10-Gb/s on-off keying signal generated by using the SSIL source over a wide range of the SSIL linewidth. We find out that there are two windows of the linewidth for the highspeed operation of the SSIL source: ultra-narrow (i.e., linewidth << receiver bandwidth) and very wide (i.e., linewidth >> receiver bandwidth). However, when the linewidth of the SSIL source is very wide, the 10-Gb/s signal generated by using this SSIL suffers severely from fiber chromatic dispersion and optical filtering. The simulation results are confirmed by experimental data measured by using an ultranarrow fiber Fabry-Perot filter (bandwidth = 700 MHz) and a bandwidth-tunable optical filter (bandwidth = 20 similar to 53 GHz). Thus, we can conclude that the optimum linewidth of SSIL for capacity and transmission distance is ultranarrow. We also present a couple of drawbacks of the ultranarrow SSIL source, compared to the conventional wide-linewidth SSIL one, such as a large spectrum-slicing loss, a large SOA input power required for the suppression of excess intensity noise inherent in the incoherent light source, and the susceptibility to in-band crosstalk.