A dynamic optical tag system and method that allows for operation over a wide temperature range. A variable wavelength optical source, such as a dual wavelength fiber laser, is generated by combining the outputs from two distributed feedback lasers having separate operating wavelengths using a wavelength division multiplexer (WDM). A quantum well optical modulator mounted on the front surface of a retro-reflector in the remote receiver end of the communication link is biased to modulate one of the two laser wavelengths. At higher temperatures, the optical modulator can be biased to operate at the wavelength of one of the two lasers. At a lower temperature, the optical modulator can be biased to operate at the second of the two wavelengths. The DC bias required to tune the optical modulator is reduced by operating at two separate wavelengths depending on temperature.