In this thesis, reduction of the Peak-to-Average Power Ratio (PAPR) of Orthogonal Frequency Division Multiplexing (OFDM) is studied. A new PAPR reduction method is proposed that is based on block coding the input data and modifying the codeword until the PAPR is reduced below a certain threshold. The method makes use of the error correction capability of the block code employed. The performance of the algorithm has been investigated through theoretical models and computer simulations. For performance evaluation, a new gain parameter is defined. The gain parameter considers the SNR loss caused by modification of the codeword together with the PAPR reduction achieved. The gain parameter is used to compare a plain OFDM system with the system employing the PAPR reduction algorithm. The algorithm performance is examined through computer simulations and it is found that power reductions around 2-3 dB are obtained especially for low to moderate number of channels and relatively strong codes.