Abstract In this paper, a model is developed for the performance analysis of IEEE 802.11b and Bluetooth systems in mutual interference environment. Based on this model, a scheme is proposed to select appropriate parameters, such as packet type, packet segmentation size, an adaptive data rate and transmit distance. Consequently the proposed scheme allows the two systems to operate in a shared environment without significantly impacting the performance of each other. The analysis comprises the collision probability for Bluetooth or IEEE802.11b packet overlapped by interference packets in both time and frequency, and the Packet Error Rate (PER) performance with distance. By using the proposed evaluation framework, the optimum packet type, segmentation size, data rate and safe distance ratio for the transmitter and receiver in a mutual interference scenario can easily be obtained.