: Cooperative relay communication technique is a new approach to obtain spatial diversity. Also this technique is considered as an efficient way to enhance reliability and coverage of communication networks. In one way relay systems with three nodes, namely source, destination and a third node, relay, it has been shown that the presence of large scale fading affects the relay optimum position in the sense of minimum outage probability. Therefore the joint effects of path loss and correlated shadowing with Rayleigh fading on Amplify and Forward (AF) one way relay system has been studied. Even an optimal relay placement algorithm was developed in order to obtain minimum outage probability in high signal to noise ratios. The results indicated that the optimal relay placement is a function of the large scale fading channel statistics. In this thesis we study the effects of large scale channel fading on two way relay systems with AF protocol. We show that the large scale channel conditio is affective on finding optimal relay placement in two way relay systems in order to minimize outage probability of each user too. At any of four scenarios of two way relay systems in the presence of correlated shadowing and path loss, we provide an approximation to the outage probability of each user for high signal to noise ratios and we obtain optimum relay placement based on this approximations for each user. It should be noted that in this thesis due to the high complexity of problem, we assume correlation coefficients between shadowing channels to be constant and independent of angle between lines connecting nodes. According to results obtained for each scenario, it can be shown if correlation coefficients of shadowing channels are constant, optimal relay placement is on the straight line connecting users. It can be seen that type of poly phases scenarios of two way relay systems is affective on outage probability performance of each user and consequently on optimal relay placement. Also, based on two criterions for outage probability of the whole multiuser system, we evaluate performance of each poly-phases scenario in two way relay system with the mentioned channel conditions. The results suggest that the same channel statistics for each poly-phases scenario in two way relay systems with AF protocol, gives the same optimal point for relay. Keywords: Cooperative Relaying Communication, TwoWay Relaying, Achievable Rate, Outage Probability, Correlated Shadowing, Relay