A novel apparatus and method of differential decoding for use in a communication system such as a cable system. The differential decoding mechanism of the present invention enables the use of the Chase algorithm for Reed Solomon (RS) codes (i.e. non-binary codes). The mechanism is well suited for use in systems employing QAM data modulation/demodulation techniques and that also incorporate use of a differential encoder such as in DOCSIS capable cable modem systems. The differential decoding mechanism is operative to analyze the input to the differential decoder and adjust the decoding action accordingly. The mechanism generates the first and second candidate constellation points needed by the Chase algorithm. Considering the differential encoding, there are four possible constellation candidates. The differential decoder reduces these four possible options to two by eliminating from consideration two of them. Depending on the number of symbols to be improved by the Chase algorithm, this reduction can potentially reduce the number of options significantly.