Dealing with the explosive increase in the amount of Internet traffic requires high-speed and huge capacity Internet protocol (IP) backbone networks. Existing IP backbone networks are constructed using point-to-point wavelength-division-multiplexing (WDM) transmission systems, where all the wavelengths are terminated link-by-link, so that rather expensive optical/electrical conversions are necessary at every node. In these systems, since every IP packet is routed at each intermediate node based on the header information, a header processing bottleneck will occur when the node input traffic exceeds several hundreds of gigabits per second. In order to mitigate these problems, an optical cross-connect (OXC) function that employs wavelength routing of the optical paths (OPs) will provide an effective solution. This paper proposes a network design method where electrical and photonic multiprotocol label switching (MPLS) technologies are used; the network is referred to as a photonic IP network. We first propose new algorithms that minimize the network cost in a multilayered network comprising electrical label switched paths (LSPs) and optical LSPs (optical paths that are controlled using the MPLS mechanism). The particular point of the proposed algorithms is that they include different cost minimization scenarios appropriate for the different OLSP provisioning conditions that are chosen as the first step in the design stage. The effectiveness of the proposed algorithms and the benefits of the OLSPs are quantitatively evaluated through various simulations.