This paper presents a systematic solution to enable the code division duplex (CDD) system that allows the uplink- and downlink channel to work on the same frequency at the same time but with different smart codes. CDD is considered to be most spectral efficient among all other duplex systems. However, in comparison with the frequency division duplex (FDD) system, a CDD mobile station (MS) receiver can suffer from an additional interference transmitted from other MSs in its vicinity, and the Base Station (BS) receiver can suffer from another additional interference delivered from the BS transmitter. Also the BS may have interference caused by the neighboring BS. In the proposed system, the MS to MS interference is reduced using a scheduling method which separates the desired MS from the interference MSs in distance, and the BS to BS interference is effectively alleviated by the use of distributed receive antennas and, furthermore, it can be reduced by the proposed interference cancellation technique. The theoretical calculations show that the CDD system has about twice large capacity compared to the FDD system.