We propose and demonstrate phase-sensitive amplification based on cascaded second harmonic generation and difference frequency generation within a periodically poled lithium niobate waveguide. Excellent agreement between our numerical simulations and proof-of-principle experiments using a 3-cm waveguide device operating at wavelengths around 1550 nm is obtained. Our experiments confirm the validity and practicality of the approach and illustrate the broad gain bandwidths achievable. Additional simulation results show that the maximum gain/attenuation factor increases quadratically with input pump power, reaching a value of +/- 19.0 dB at input pump powers of 33 dBm for a 3 cm-long waveguide. Increased gains/reduced powers for a fixed gain could be achieved using longer crystals.