In this paper a scheme of intra‐cell spatial resource reuse is proposed for a peer‐to‐peer (P2P) enabled TDD‐CDMA system to increase the system capacity via only software update. On account of the new interference scenario in our scheme, a more accurate model of signal to interference and noise ratio (SINR) is deduced and analyzed instead of using the conventional equation. As demonstrated by our system‐level simulations, the capacity is significantly improved by reusing the same radio resource among different P2P transmitters within a single cellular cell in the spatial domain. Furthermore, we employ critical values of SINR target observed from simulation results to indicate whether the P2P‐enabled system is resource‐restricted or interference‐restricted for a certain application scenario. By means of a hexagon‐padding plan, the relation between co‐channel reuse distance and single‐hop distance is also pointed out to help to apply our scheme to a real implementation. Copyright © 2008 John Wiley & Sons, Ltd.