In this paper, we present a novel signal candidate generation method and propose a new joint coding and probability peak to average power ratio (PAPR) reduction scheme for a Luby transform (LT) coded orthogonal frequency division multiplexing (OFDM) system. When a few LT packets are mapped into an OFDM symbol, all subcarriers are automatically divided into several blocks. We permutate this packets and assign them different subcarrier blocks to generate different signal candidates instead of multiplying by many phase rotation vectors and using active constellation extension, and the transmitted symbol will be the one whose PAPR is the smallest. Also, we introduce one phase rotation vector to further reduce PAPR. Simulation results prove that our proposed scheme can obtain effective PAPR reduction performance. Since the permutation operation does not change the degree value of each packet, the new scheme can still maintain good decoding performance.