AbstractThe forthcoming communications standards are conjectured to require unprecedentedly high spectral efficiency values. Motivated by this fact, we propose a new transmission scheme for multiple‐input multiple‐output systems, which is termed as power permutation modulation (PPM). In addition to the conventional data‐carrying modulated symbols, some amount of extra information is conveyed in the distinct permutations of power allocation levels associated with the modulated symbols. The detection of the additional bits is performed by a power permutation recovery process at the receive side. Unlike the common approach, the power allocation is exploited as a new degree of freedom for carrying information without requiring any channel state information at the transmitter. The application of the introduced method is exemplified for zero‐forcing beamforming and space‐time block coding systems under digital phase modulation. It is shown that, without any important additional complexity, some notable signal‐to‐noise ratio gains (as large as 3 dB) are attained as compared to the standard approaches. An exact closed‐form result on the bit error rate (BER) of the presented PPM scheme is provided. The obtained expression is used to obtain the optimum power allocation levels such that the overall BER is minimized.