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This paper presents a novel differential coding method for the symmetrically differential polarization shift-keying system. The proposed differential coding method, which can overcome the slow polarization variation in the fiber, constructs the reference frame by setting the sum, the difference, and the cross product of previous two symbols as the first, second, and the last axes of the signal space. Obviously, each axis is determined by the previous two symbols together. Thus, at the receiver, the new scheme constructs a noisy reference frame more accurately than other schemes and yields better performance. The optimal constellation for the system is symmetric and easy to find. The analytical integral form for the bit error rate (BER) of the proposed system is derived, and the saddle point method is applied to obtain the analytical results. It is found that the performance in terms of BER is much better than that of other differential polarization shift-keying systems. The analytical results agree with the simulation very well.