This paper studies performance of two-hop decodeand-forward (DF) relay system with the implemented polarization diversity at the receiver. Two correlated and nonidentical Ricean fading channels are assumed for the relay to destination link, and maximal ratio combining (MRC) of the received signals is performed at the receiver. Communication between source and relay is also assumed to be over the Ricean fading channel. In order to determine the level of improvement introduced through the implementation of polarization diversity, performances of the considered system are compared with the standard DF relay system with single antenna terminals. The obtained results show that, using polarization diversity, the same BER (Bit Error Rate) values can be obtained with significantly lower SNR (Signal to Noise Ratio), despite a certain level of correlation and power unbalance between the diversity branches. In that manner, compared to the system with no diversity, the total needed transmit power for achieving the same level of system performances is reduced, and thus more energy efficient communication is enabled.