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The BER performance for an optimal circular 16-QAM constellation is theoretically derived and applied in wavelet based OFDM system in additive white Gaussian noise channel. Signal point constellations have been discussed in much literature. An optimal circular 16-QAM is developed. The calculation of the BER is based on the four types of the decision boundaries. Each decision boundary is determined based on the space distance d following the pdf Gaussian distribution with respect to the in-phase and quadrature components nI and nQ with the assumption that they are statistically independent to each other. The BER analysis for other circular M-ary QAM is also analyzed. The system is then applied to wavelet based OFDM. The wavelet transform is considered because it offers a better spectral containment feature compared to conventional OFDM using Fourier transform. The circular schemes are slightly better than the square schemes in most SNR values. All simulation results have met the theoretical calculations. When applying to wavelet based OFDM, the circular modulation scheme has also performed slightly less errors as compared to the square modulation scheme.