An analysis of bit error rate (BER) in a binary digital FM system with postdetection diversity is presented. Expressions for the average BER due to additive white Gaussian noise (AWGN), random FM noise and delay-spread in the multipath channel are derived for reception using differential demodulation (DD), and frequency demodulation (FD) assuming independent fading signals. Calculated results for MSK show that the BER performance is strongly dependent on the rms-delay to bit duration ratio and that the delay-spectrum shape is of no importance when the receiver predetection filter BT product is optimized for the effect of AWGN. The effect of fading correlation on the diversity improvement is also analyzed for a two-branch case with multiplicative Rayleigh fading signals. Expressions for the average BER due to AWGN and random FM noise are derived. Calculated results are shown for the average BER due to random FM noise assuming a horizontally spaced antenna system at a mobile station. It is shown that the use of small antenna spacings leads to a diversity improvement greater than that obtainable for the case of independent AWGN.