This paper provides a brief overview of the operating principles and applications of smart antennas in mobile communications. Smart antennas adaptively process signals from several antenna elements in order to exploit the spatial dimension of the channel. This can be done either by beamforming or by exploiting a diversity effect. It is possible to improve transmission quality and capacity in both TDMA and CDMA systems with either of these methods. These benefits are even more pronounced if adaptive antennas are used at both the transmitter and the receiver.