Cooperative communication provides a new way of introducing spatial diversity to wireless systems. In order to increase the spectral efficiency of coded cooperative relaying system, the adaptive modulation technique is presented under Rayleigh fading channel in this paper. The source and relay adapt their modulation schemes based on the channel condition of all three links, i.e. source to relay, source to destination and relay to destination. Furthermore, since the available channel knowledge of the source to relay link is usually non-ideal at the destination in practice, a simplified estimation of this link quality is also given. Simulation demonstrates the effectiveness of the proposed technique in improving the data throughput.