We report a new mechanism of direct frequency modulation, the cavity‐mode enhanced frequency modulation (CME‐FM), using the newly developed cleaved‐coupled‐cavity (C3) semiconductor laser. In this operation, one of the diode of the C3laser was operated as a laser, while the other diode was operated as a frequency modulator. It was shown that a very large frequency excursion of 150 A˚ and frequency tuning rate of 10 A˚/mA have been obtained with a C3GaInAsP crescent laser operating at 1.3 &mgr;m. Time‐resolved spectral and spectral‐resolved pulse response measurements also showed that such C3lasers operated in highly stable single‐longitudinal mode at all times even under high‐speed direct frequency modulation. In addition to the important application as the optical source in FM optical communication systems, the present CME‐FM C3laser can also be used as the optical source in wavelength‐division multiplexing systems. Further, it opens the possibility of ultrahigh capacity multilevel optical FM information transmission systems.