Abstract: This paper investigates the wireless communication system where a source node transmits data to a destination node through two relays. To reduce the multiplex loss of conventional cooperative relaying schemes, we proposed a novel scheme with the combination of source network coding and sequential transmission, called sequential source network coding (SSNC). In the proposed scheme, the source performs network coding on the data to be transmitted every three time slots, and the two relays transmit and receive data sequentially in adjacent time slots. In every time slot, one relay receives data from source while another relay forwards its received data to the destination. Based on the performance analysis of outage probability and diversity-multiplexing tradeoff (DMT), it is shown that the proposed scheme has the same diversity order but higher transmission efficiency compared with traditional repetition coding or distributed space time coding scheme, which can be used to ensure both performance and efficiency in practical communication systems. Simulation results confirm our conclusion.