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A transmit-receive diversity system in correlated Rayleigh fading in which the receiver estimates the channel through pilot symbols, and feeds this information back to the transmitter through a feedback path, is considered. The imperfect channel state information (CSI) is used by the transmitter to obtain the transmit weight vector for data transmission. The optimum receiver in the maximum-likelihood (ML) sense obtained from the conditional distribution of the received signal vector, conditioned on the imperfect CSI and the transmit weight vector, is derived for the system. For the case of M-ary phase-shift keying (MPSK), an analytical expression for the conditional symbol error probability (SEP), conditioned on the channel estimate and the transmit weight vector, is obtained, with the transmit weight vector chosen to minimize this conditional SEP. For the receive-only and transmit-only correlation scenarios with ill-conditioned eigenvalues of the receive and transmit covariance matrices (that is, some of the eigenvalues are very small), we derive expressions for the diversity gain. Numerical results are presented to compare the performance of our receiver with that of a conventional receiver in case of exponentially correlated fading. These results show that the optimum receiver typically has about a 0.5-dB gain over a conventional receiver when the correlation coefficient exceeds 0.5 and the number of receive antennas is much larger than the number of transmit antennas.