Bit-interleaved coded modulation with iterative decoding (BICM-ID) is suitable for correlated Rayleigh fading channels. Additionally, BICM-ID using differential encoding can avoid the pilot overhead. In this paper, we consider BICM-ID using 16-DAPSK (differential amplitude and phase-shift keying). We first derive the probability of receiving signals conditioned on the transmission of input bits for general differential encoding; then we propose two new 16-DAPSK bit labeling methods. In addition, convolutional codes for the new bit labeling are developed. Both the minimum distance and the simulation results show that the proposed labeling has better error performance than that of the original differential encoding, and the searched new codes can further improve the error performance.