The invention belongs to the technical field of wireless communication, and provides a method of reducing a PAPR of an OFDM (Orthogonal Frequency Division Multiplexing) system by an adaptive companding technique with a u rate, indexes and k transform combined. The method comprises the following steps: S1, serial-to-parallel conversion is carried out on data, inverse fast fourier transform processing is then carried out, and the optimal companding algorithm is selected; S2, according to the algorithm selected in the first step, a cyclic prefix with a corresponding length is added, and data are transmitted; S3, the type of the cyclic prefix receiving the data is detected, and the cyclic prefix is removed; and S4, according to the type of the cyclic prefix, a corresponding inverse transform algorithm is called to transform signals after the third step, and through fast fourier transform and parallel-to-serial conversion, the signals are demodulated and outputted. The scheme of the invention selects the optimal companding algorithm for each OFDM symbol, the cyclic prefix with a corresponding length is added for marking, and through detecting the length type of the cyclic prefix, a corresponding inverse companding algorithm is called for retrieving the signals. Compared with the traditional method, the method of the scheme of the invention can more effectively reduce the peak-to-average power ratio (PAPR), and larger system bit error rate overhead is not caused.