Abstract: Orthogonal frequency division multiplexing (OFDM) technology, which can divide the frequency selective fading channel into multiple flat fading sub-channels, is widely used in wireless communication systems because of its robustness to frequency selectivity in wireless channels and the ability to mitigate multipath fading that causes inter-symbol interference. Therefore, it has become one of the key technologies of 5G mobile communication. However, it has a serious shortcoming, i.e., the high peak-to-average power ratio (PAPR), especially when the number of subcarriers is large. High PAPR will make the high-power amplifier work in its nonlinear region, leading to inter-modulation interference among subcarriers and out-of-band interference of OFDM signals. Active constellation extension (ACE) reduces the PAPR of OFDM signals effectively by extending external constellation points outwards. Most of the ACE algorithms currently used set a fixed threshold to limit the amplitude of the OFDM signal during the iteration. As the statistical characteristics of OFDM signals will change after each iteration, the same threshold will reduce the ability of the method to suppress the PAPR of OFDM systems. To solve this problem, an optimal threshold ACE (OTACE) method is proposed, which can determine an appropriate threshold according to the signal power at each iteration to enhance the performance of PAPR reduction. The appropriate number of iterations is obtained by data fitting, and on this basis, the impact of the OTACE algorithm in suppressing the PAPR is simulated and analyzed. The simulation results demonstrate that compared with POCS and SGP, OTACE can increase the performance to reduce PAPR by approximately 5 dB and 3 dB gains, respectively. Under the CDT 1, CDT 6, and Brazil A channels, the impact of the OTACE algorithm on the bit error rate (BER) is tested when the Doppler frequency shift is 20 Hz and 60 Hz, respectively. The experimental results show that the OTACE can achieve better BER performance. Compared with POCS, OTACE has about 1 dB signal-to-noise ratio (SNR) gain in BER performance. OTACE has obvious advantages over SGP at a high SNR.