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Network coding has been receiving much attention recently for its ability to improve network throughput and enhance network robustness. In this paper, we investigate the design of network coding in wireless networks and propose a combined low complexity network coding and channel decoding scheme. We analyze the capacity of the proposed scheme for both the binary symmetric channel (BSC) and AWGN channel and show that it can achieve almost the same channel capacity as traditional network coding with a small degradation in the system bit error rate (BER) performance while achieving almost 50% complexity reduction. It is also shown that the proposed network coding design can be applied in wireless cooperative networks.