In this paper, a novel modulation scheme for UWA communications which uses coherent pseudo-random phase carrier COFDM modulation is presented. The new system configuration shares the advantages of the correlating receiver of the direct sequence spread spectrum (DS-SS) system and COFDM modulation. A key feature of the new system is that a pseudo-random Gaussian noise (PRGN) signal can be used as a channel sounding probe for measuring the complex channel transfer function for the frequency domain signal equalization. The PRGN signal itself can be optimized to the available dynamic range of the transmitter DAC in order to provide the best peak-to-rms ratio (or equivalently, the crest factor). Because of the unique random phase sequence used for the optimization process, synchronization can be achieved by linear cross correlation between the received signal and a known replica phase sequence in the receiver. B y virtue of the frequency domain equalization and maximum likelihood Viterbi decoding, the system is shown to have high stability and can operate with low BER at extremely low SNR conditions.