Abstract Interference can be a significant problem in loosely organized networks such as ad-hoc radio networks. One technique for dealing with interference is to attempt joint detection of all signals arriving at a node. Iterative algorithms based on the turbo-principle yield significant performance improvements when applied to this problem. This paper concentrates on performance analysis of iterative interference cancellation for forward-error correction coded signals in the presence of Rayleigh fading. The variance transfer analysis of Alexander et al. [European Trans. Telecommun. 9 (5) (1998) 419–426] is generalized for unequal user powers and codes. A surprising result is that the received power variation due to fading can assist convergence.