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Error-rate performance of a digital FM with differential detection in the presence of both thermal Gaussian noise and cochannel interference is theoretically analyzed in the fast Rayleigh fading environment encountered in the typical UHF or microwave land mobile radio channels. The temporal correlation of the fades is included in the performance analysis. The error probability is presented by a simple closed form for the important situations where both effects of Gaussian noise and cochannel interference predominate in causing errors. Finally, a comparison with the other detection schemes, e.g., discriminator and coherent detections, is given.