An improved split-step method (SSM) for digital backward propagation (DBP) applicable to wavelength-division multiplexed (WDM) transmission with polarization-division multiplexing (PDM) is presented. A coupled system of nonlinear partial differential equations, derived from the Manakov equations, is used for DBP. The above system enables the implementation of DBP on a channel-by-channel basis, where only the effect of phase-mismatched four-wave mixing (FWM) is neglected. A novel formulation of the SSM for PDM-WDM systems is presented where new terms are included in the nonlinear step to account for inter-polarization mixing effects. In addition, the effect of inter-channel walk-off is included. This substantially reduces the computational load compared to the conventional SSM. (C) 2011 Optical Society of America