Abstract: With the proliferation of the industrial internet, passive optical networks (PON) have attracted attention from industry and academia. Industrial PONs need to meet the requirements of ultra-high speed, ultra-large connections, and low cost to be able to cope with diverse industrial internet scenarios. Physical layer modulation formats, multiplexing modes, transmission schemes, and digital signal processing algorithms have always been the focus of research in this field. Direct detection and 10 G devices are extensively studied due to their low cost and ease of deployment. However, meeting the power budget targets of a high-speed PON can be challenging. Transmission of a high-order modulation signal can improve the system’s capacity; however, it may also decrease the receiver’s sensitivity. Polarization multiplexing technology, coherent detection, and advanced digital signal processing technology can be utilized to meet the demands of industrial PON, such as ultra-high speeds, ultra-large connections, ultra-high capacities, high receiver sensitivity, and high power budgets. The use of intensity modulation schemes at the transmitter would reduce the overall cost of the system. Herein, we propose a digital coherent detection system with polarization multiplexing intensity modulation suitable for industrial PON transmission. The 50 Gbit·s⁻¹ signals modulated with four-level pulse amplitude modulation (PAM 4) and on–off keying (OOK) are transmitted on the simulation platform. Performance assessments of back to back (BTB) transmission and fiber transmission over 20 km are studied to prove the superiority of this proposed scheme. A power budget of more than 32 and 36 dB can be achieved with the polarization multiplexing coherent detection system-based transmission of 50 Gbit·s⁻¹ PAM 4 and NRZ signals, respectively, on a 20 km C-band single-mode fiber at a threshold of 3.8×10⁻³, which is a considerable improvement over intensity modulation direct detection systems. The superiority of the proposed scheme is further verified by the fact that the 100 Gbit·s⁻¹ PAM 4 signal has better transmission performance in the polarization multiplexing intensity modulation coherent detection system than the NRZ signal. Considering the system performance, the polarization multiplexing intensity modulation coherent detection scheme is expected to be one of the promising solutions for high-speed PON systems. Finally, the development trends of the physical layer of industrial PON are discussed.