In the thesis, the performance of a cellular CDMA system with a basestation antenna diversity and adaptive modulation on Rayleigh fading and log-normal shadowing channels is analyzed. The transmitter uses the feedback information on the channel estimate to decide the modulation levels, BPSK, QPSK, or 8PSK, depending on the channel condition. If the channel fading is lower, a higher modulation level is employed and the data rate is higher; while if the fading is deep, a lower level is used. With a pre-designed value of the probability of symbol errors, the data rate can be increased with optimal thresholds for the adaptive switching between BPSK, QPSK, and 8PSK.