Abstract-In this paper, we derive an analytical expression for the exact pairwise error probability (PEP) of a differential space-time coded system operating over a spatially correlated slow fading channel. An analytic model for spatial correlation is used which fully accounts for antenna spacing, antenna geometry and non-isotropic scattering distributions. Inclusion of spatial information in error performance analysis provides valuable insights into the physical factors determining the performance of a differential space-time code (DSTC). Using this new PEP expression, we investigate the effects of antenna spacing, antenna geometries and azimuth power distribution parameters (angle of arrival/departure and angular spread) on the performance of a differential space-time block code (DSTBC) proposed in the literature for two transmit antennas.