We present the first demonstration of all optical wavelength conversion in chalcogenide glass fiber including system penalty measurements at 10 Gb/s. Our device is based on singlemode As2Se3 chalcogenide glass fiber which has the highest Kerr nonlinearity (n2) of any fiber to date for which either advanced all optical signal processing functions or system penalty measurements have been demonstrated. We achieve wavelength conversion via cross phase modulation over a 10 nm wavelength range near 1550 nm with 7 ps pulses at 2.1 W peak pump power in 1 meter of fiber, achieving only 1.4 dB excess system penalty. Analysis and comparison of the fundamental fiber parameters, including nonlinear coefficient, two-photon absorption coefficient and dispersion parameter with other nonlinear glasses shows that As2Se3 based devices show considerable promise for radically integrated nonlinear signal processing devices.