We propose a symmetric 40-Gb/s aggregate rate time and wavelength division multiplexed passive optical network (TWDM-PON) system with the capability of simultaneous downstream differential phase shift keying (DPSK) signal demodulation and upstream signal chirp management based on delay interferometer (DI). With the bi-pass characteristic of DI, we experimentally demonstrate the bidirectional transmission of signals at 10-Gb/s per wavelength, and achieve negligible power penalties after 50-km single mode fiber (SMF). For the uplink transmission with DI, a ~11-dB optical power budget improvement at a bit error ratio of 1e-3 is obtained and the extinction ratio (ER) of signal is also improved from 3.4 dB to 13.75 dB. Owing to this high ER, the upstream burst-mode transmitting is successfully presented in term of time-division multiplexing. Moreover, in our experiment, a ~38-dB power budget is obtained to support 256 users with 50-km SMF transmission.