The AREC (adaptive reference echo cancellation) algorithm is presented for an echo canceler used in full-duplex two-wire digital transmission on digital subscriber loops. The AREC algorithm incorporates a decision-directed estimation of and compensation for the far-end signal which is a source of interference to the conventional echo canceler adaptation algorithm. The AREC algorithm thus offers much faster convergence and shorter coefficient Wordlengths than the conventional algorithm. Analysis and simulation of the performance and convergence of both AREC and conventional echo canceler adaptation algorithms are carried out. Included in the analysis is the effect of receiver delay and coefficient wordlength requirements. A simple and robust startup procedure is proposed and investigated by simulation. Copyright