Frequency modulation (FM) spectroscopy is a new method of optical heterodyne spectroscopy capable of sensitive and rapid measurement of the absorption or dispersion associated with narrow spectral features. The absorption or dispersion is measured by detecting the heterodyne beat signal that occurs when the FM optical spectrum of the probe wave is distorted by the spectral feature of interest. A short historical perspective and survey of the FM spectroscopy work performed to date is presented. Expressions describing the nature of the beat signal are derived. Theoretical lineshapes for a variety of experimental conditions are given. A signal-to-noise analysis is carried out to determine the ultimate sensitivity limits. © 1983 Springer-Verlag.