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We describe a picosecond-scale synchronization system that embeds two-way time transfer into a 10 Gbit/s optical communication link. This system leverages a layer 2 retransmission system originally developed to mitigate link fades and data loss in free-space optic links operating in the atmosphere. This system utilizes a field programmable gate array (FPGA) to collect data from external analog-to-digital converters, generate a custom-frame communications link to exchange the data, and perform the two-way time transfer calculations and corrections. Synchronization occurs in multiple steps starting with acquiring lock of the custom data frame within the communications link. Bit-period-level (100 picoseconds) synchronization occurs next by exchanging digital lifetime counter timestamps across the link and performing a two-way time transfer (TWTT) calculation to determine the offset. Finally, sub-bit-period synchronization is obtained by performing a phase comparison of the FPGA transceiver’s local transmit clock and the remote recovered clock and then reporting the phase difference. This phase difference is used as the error signal for a coarse and fine proportional-integral-derivative (PID) control loop architecture. This architecture syntonizes an oven-controlled crystal oscillator (OCXO) in each retransmission system. This OCXO is the source of all frequency signals within the system including the FPGA fabric clock, the transceiver clock, and the sample clock of the analog-to-digital converters. Deriving all clock signals from the same 10 MHz frequency source enables synchronized distributed sensing applications. Our measurement results show a time deviation (TDEV) less than 400 femtoseconds from 1 to 100 seconds. As an example distributed sensing application, we demonstrate relative centimeter-scale time difference of arrival (TDOA) measurements with less than 1.1 cm relative error on distances up to 2.5 km. For these initial results we use a fiber optic link. We will discuss the work required to transition operation to free-space optical links in the future.