Cross‐layer design is a generic designation for a set of efficient adaptive transmission schemes, across multiple layers of the protocol stack, that are aimed at enhancing the spectral efficiency and increasing the transmission reliability of wireless communication systems. In this paper, one such cross‐layer design scheme that combines physical layer adaptive modulation and coding (AMC) with link layer truncated automatic repeat request (T‐ARQ) is proposed for multiple‐input multiple‐output (MIMO) systems employing orthogonal space‐‐time block coding (OSTBC). The performance of the proposed cross‐layer design is evaluated in terms of achievable average spectral efficiency (ASE), average packet loss rate (PLR) and outage probability, for which analytical expressions are derived, considering transmission over two types of MIMO fading channels, namely, spatially correlated Nakagami‐m fading channels and keyhole Nakagami‐m fading channels. Furthermore, the effects of the maximum number of ARQ retransmissions, numbers of transmit and receive antennas, Nakagami fading parameter and spatial correlation parameters, are studied and discussed based on numerical results and comparisons. Copyright © 2009 John Wiley & Sons, Ltd.