In this paper we proposed a novel method called network coding combined with cooperative relaying technique in cellular communication system, it aims to improve the network throughput and to enhance the spectral efficiency for the next generation wireless networks. We had analyzed the performance of decode and forward relaying. Here introduced a combined scheme of network coding and cooperative relaying. Furthermore, we study the end-to-end performance of network using decode and forward relaying over Rayleigh faded channel. The simulation result helps in supporting the theoretical concept that the combined scheme of network coding and cooperative relaying outperforms conventional relaying technique. Additionally a perfect relay selection method is also implemented here on the basis of its distance from the BS . Performance evaluation made on the basis of outage probability and the system spectral efficiency for downlink cellular transmission and concentrating more on the performance enhancement of the celledge users.