Multilevel coded modulation (MLCM) scheme is proposed for the application of combination between pulse position modulation (PPM) and binary correct coding. The bits demodulated from one PPM symbol are divided into different subcode channels by using the multilevel labels structure of multilevel coding, and the multiple-step demodulation and decoding (MSDD) algorithm of the scheme is derived with signal set partitioning and maximum-likelihood detection of PPM. Simulation under weak turbulence shows that PPM MLCM gets 0.85 dB gain over single-level coded modulation under the bit-error rate (BER) of 10-6, and it can provide unequal error protection to in formation with different importance. When the subcode types are given, the system with the subcodes configuration in order of error corrective ability in levels, as well as MSDD being used, will have good error performance, much better than direct parallel decoding method.