The impacts of polarization\|dependent dispersion on systems are investigated brefly, based on which we propose a threestage higherorder polarization mode dispersion(PMD) compensation scheme. Theoretical analysis shows that it is capable of compensating polarization\|dependent dispersion and principal states of polarization rotation rate at the same time. The two possible operating points of this compensator are proposed. Numerical results show that the maximum tolerable PMD value after threestage compensation has been improved by 17% per bitslot than that using twostage compensator.