AbstractThe moment‐generating function (MGF) of the received signal‐to‐noise ratio (SNR) is a convenient tool in the performance analysis of modulation schemes in fading channels. In this letter, we derive the MGF for gamma‐shadowed Ricean fading channels under the assumption that the average power of the Ricean fading is characterised by a gamma distribution. The MGF is expressed in a series form. An application of the derived MGF for evaluating the average bit error probability (ABEP) for binary differential phase‐shift keying (DPSK) is given. The exact expression for ABEP and the corresponding asymptotic expression (assuming large SNR) are derived and mutually compared. The computational efficiency is elaborated on. Special cases of the exact expression for ABEP agree with corresponding known results. Copyright © 2007 John Wiley & Sons, Ltd.