This paper shows that the experimental configuration for self-diffract
ion experiments can be applied to squeezed light (SL) generation. Nonl
inear processes arising from cascading of the second order chi((2)) no
nlinearity are responsible for the pump waves squeezing far from the p
erfect phase matching points for second harmonic and sum frequency gen
eration. The operation of squeezing is performed by interference of co
-travelling waves which depending on phase matching conditions for the
cascaded processes, are affected either by self-phase modulation (SPM
) (as in the nonlinear Mach-Zehnder interferometer) or by cross-phase
modulation (CPM) (as in the type-II phase matched second harmonic gene
ration scheme). Since large values of induced third order nonlineariti
es chi(ind)((3)) are manifested in the presence of cascaded chi((2)),
this scheme of SL generation may be of great practical interest. Diffr
acted waves may also be used to create squeezed vacuum.