This paper proposes a new orthogonal frequency division multiplexing (OFDM) system, based on discrete cosine harmonic wavelet (DCHWT) for PSK and 16-QAM modulated signals. This system uses energy compaction property of discrete cosine transform (DCT) that provides low leakage in subcarriers. DCHWT based OFDM system provides improved performance in terms of bit error rate (BER) and reduction in the peak to average power ratio (PAPR) compared to conventional cyclic prefix (CP) based Fourier transform OFDM (DFT-OFDM). Application of μ-law companding to proposed system further improves the PAPR performance. The complementary cumulative distribution (CCDF) plots corroborate the same. BER performance is on par or better than that of Haar wavelet based OFDM in addition to improvement in PAPR. PAPR improved is in the range of 0.8-2.3 dB compared to Haar and DFT OFDM respectively, with remarkable improvement in BER. Proposed method is simple, does not require explicit decimation, interpolation, associated filtering and delay compensation for reconstruction, compared to other time domain wavelet transforms.