Infrared system provides a feasible alternative to radio system for indoor wireless communication. Direct spread CDMA format is a promising candidate for infrared transmission system. In indoor systems, transmission is severely impaired by noise and interference produced by artificial light. In this thesis, the performance of the DS CDMA indoor wireless infrared system on diffuse channels is analyzed by taking the effects of inter symbol interference (ISI) and electronic ballast florescent light interference into account. Moreover, to mitigate the effects of ISI and electronic ballast florescent light interference, an adaptive filter technique is proposed for noise cancellation and equalization. This is done by considering a ceiling bounce model for the channel and electronic ballast florescent light for noise. Analytical and simulation results show 7dB improvement in SINR and 10-15 times improvement in BER.