Abstract: Because of selective fading of frequency,the frequency response of each subchannel of OFDM is different. In order to ensure bit error rate performance of the system, OFDM will decide distribution of bit and power according to the largest attenuation of the subchannels, which will cause great waste.So,the paper presented an adaptive OFDM(AOFDM) algorithm which made each carrier wave of OFDM to select modulation mode and power distribution according to dynamic change of channel characteristics and got the best match of channel capability. The paper introduced bit and power algorithm of AOFDM in details, analyzed characteristics of underground wireless communication system, and pointed out AOFDM algorithm was very suit for underground wireless communication system. It also gave block diagram of designed underground wireless communication system based on AOFDM.Simulation result showed that the system has good applying effect.