The high growth in network bandwidth drives the need to scale DWDM networks and to transport 100GbE signals over existing fiber plants. Polarization-multiplexed return-to-zero differential quadrature phase shift keying (PM-RZ-DQPSK), combined with direct detection and PMD tracker has been considered as a promising solution. In this paper, PM-RZ-DQPSK signals were implemented with high-speed and precise optical polarization compensation. Stable polarization demultiplexing for 800 rad/s polarization scrambling combined with 112 Gb/s direct detection PM-RZ-DQPSK transmission over 960 km was demonstrated.