A polarization-amplitude-phase modulation (PAPM) scheme for wireless communication is proposed to further improve spectrum efficiency. Through the proposed scheme, each carriers polarization state, amplitude, and phase can each carry transmitting data. Impairment of PAPM because of the wireless channels polarizationdependent loss effect is analyzed. To mitigate this impairment, a pre-compensation algorithm is also presented; the PAPMs symbol error rate (SER) is also derived on the basis of the proposed pre-compensation. Furthermore, to minimize the PAPMs SER, a SER optimization model is established and the optimal modulation ratio, which is defined as the ratio of the data rate achieved by the polarization state to the amplitude-phase, is calculated. Finally, both numerical simulations and experimental results show that PAPM can significantly improve SER and spectrum efficiency performance compared with the traditional PSK and QAM schemes.