The conventional method used to detect the range to an underwater object is by sending and receiving some form of acoustic energy. However, acoustic systems have limitations in the range resolution and accuracy they can provide under certain conditions. The potential benefits of a laser-based range finder include high-directionality and covertness, speed of response, and the potential for high-precision, range accuracy. These benefits have been exploited in the above-water environment where kilometer propagation ranges are achieved with sub-meter range precision. The challenge in using optical techniques in the underwater environment is overcoming the exponential loss due to scattering and absorption. While absorption extinguishes photons, scattering redistributes the light and produces a 'clutter' signal component from the surrounding water environment. Optical modulation techniques using compact laser diode sources are being investigated to help suppress this 'clutter' and provide accurate target range information in a wide range of underwater environments. To complement the experimental efforts, a theoretical model has been developed to help optimize the system parameters and test the performance of various configurations as a function of different water optical properties. Results from laboratory water tank experiments will be discussed and compared with model predictions.