Abstract: Cooperative diversity is an efficient technology to combat fading and reduce transmission terminals’ required power, but there are energy and cost constraints of transmission terminals. These problems can be solved by using continuous phase modulation, which has a near-unity Peak-to-Average Power Ratio. Thanks to the property of its continuous phase and constant envelope, CPM signals are applicable to low-cost nonlinear power amplifier. In this paper, capacity of cooperative transmission system based on CPM is studied. A lower bound on the capacity, which is called symmetric information rate, is given for CPM-based cooperative diversity system in flat fading channel. The calculation of SIR is based on BCJR algorithm and information theory. The analysis and numerical results show that the CPM cooperative diversity system can get a higher capacity and a lower outage probability than CPM SISO system. Further more, aiming at maximizing ergodic capacity, optimal relay location strategy is discussed and obtained when considering path loss. The analysis and numerical results show that, comparing to symmetric relay location scheme, the optimal relay location system can get obviously higher capacity. And then, capacity for CPM cooperative diversity system with imperfect channel estimation and imperfect SNR estimation are studied.