Abstract: Relay, which serves to enhance the performance of future communication networks, is one of the most promising techniques for IMT-Advanced systems. The potential performance improvement of relay is investigated in this work. Our investigation consists of two steps. In the first step, to obtain a better understanding of the fundamental properties of relay channels, we conducted outdoor measurements at 2.35 GHz with 50 MHz bandwidth in a typical urban area of China. Three links constituting the relay transmission, i.e., the link between base station and relay station, the link between relay station and mobile station and the link between base station and mobile station were measured by employing a real-time channel sounder. Two main factors that affect the MIMO channel capacity, i.e., the channel gain and effective degrees of freedom, are investigated. The cross-polarization discrimination was obtained by utilizing space-alternating generalized expectation-maximization algorithm. The channel parameters of the three links are statistically analyzed and compared. In the second step, based on the measured data, the performance of different relaying schemes, i.e., amplify-and-forward and decode-and-forward, is evaluated. The impact of RS antenna configuration on the capacity is also analyzed. The measurement and evaluation results reveal that the relay can significantly improve the system coverage and performance.