In this paper, we propose a permutation index differential chaos shift keying with the noise reduction (NR-PI-DCSK) to alleviate the negative effect of the additive noise and fading interference. Instead of sending a β-length chaotic sequence as the reference in the conventional PI-DCSK, the transmitter of NR-PI-DCSK generates β/R chaotic samples and repeats R times, which serve as the reference sequence. The permuted copy of the reference is used to carry the data given the predefined permutation index. After the correlation and averaging of these R chaotic segments at the receiver, the variance of noise and fading can be greatly reduced and the performance is improved. Then, we derive the analytical BER expressions for the multipath fading channels, which are verified by the consistent simulations. The results show that the proposed NR-PI-DCSK can achieve up to 3 dB performance gain over the conventional PI-DCSK in different wireless fading channels. In addition, the performance advantage of the proposed NR-PI-DCSK is also demonstrated in a typical UWB channel by simulations. More importantly, the proposed scheme maintains almost the same low transceiver complexity as the conventional ones, since it only requires the correlators. Thus, the NR-PI-DCSK can be seen as a promising candidate for low-cost short-range IoT communications.INDEX TERMS Differential chaos shift keying (DCSK), permutation index (PI), noise reduction (NR), performance analysis.