In this paper, we propose and analyze a novel idea of performing interference cancellation (IC) in a distributed/cooperative manner, with a motivation to provide multiuser detection (MUD) benefit to nodes that have only a single user detection capability. In the proposed distributed interference cancellation (DIC) scheme, during phase-1 of transmission, an MUD capable cooperating relay node estimates all the sender nodes' bits through multistage interference cancellation. These estimated bits are then sent by the relay node on orthogonal tones in phase-2 of transmission. The destination nodes receive these bit estimates and use them for interference estimation/cancellation, thus achieving IC benefit in a distributed manner. For this DIC scheme, we analytically derive an exact expression for the bit error rate (BER) in a basic five-node network (two source-destination node pairs and a cooperating relay node) on AWGN channels. Analytical BER results are shown to match with simulation results. For more general system scenarios, including more than two source-destination pairs and fading channels without and with space-time coding, we present simulation results to establish the potential for improved performance in the proposed distributed approach to interference cancellation. We also present a linear version of the proposed DIC.