Using the exponential growth of idler gain and the properties of gain saturation of the four-wave mixing effect in a dispersion-shifted fiber (DSF), a 2×40 Gb/s two-channel all-optical 3R (re-amplification, re-shaping, re-time) regeneration system based on degraded signal pump is proposed. The theoretical analysis and experimental validation of the regenerative principle are conducted, and the regeneration experiment of different degraded signals in two wavelengths of 1550.92 nm and 1557.36 nm is completed. The receiver sensitivity (power penalty) of the degraded signals is improved from -20.3 dBm to -27.3 dBm and from -20.4 dBm to -25.6 dBm. The amount of improvement is 7.0 dB and 5.2 dB. System experimental results verify the theoretical analysis. A viable solution is proposed to solve the problem of simultaneous multi-channel signal regeneration in wavelength division multiplex (WDM) system.