We present a folded free-space polarization-controlled optical multistage interconnection network (MIN) based on a dilated bypass–exchange switch (DBS) design that uses compact polarization-selective diffractive optical elements (PDOE’s). The folded MIN design has several advantages over that of the traditional transparent MIN, including compactness, spatial filtering of unwanted higher-order diffraction terms leading to an improved signal-to-noise ratio (SNR), and ease of alignment. We experimentally characterize a folded 2 × 2 switch, as well as a 4 × 4 and an 8 × 8 folded MIN that we have designed and fabricated. We fabricated an array of off-axis Fresnel lenslet PDOE’s with a 30:1 SNR and used it to construct a 2 × 2 DBS with a measured SNR of 60:1. Using this PDOE array in a 4 × 4 MIN resulted in an increased SNR of 120:1, highlighting the filtering effect of the folded design.