An apparatus and a method for interference cancellation in a broadband wireless communication system are provided. A receiving apparatus includes an estimator, a channel compensator, and a demodulator. The estimator estimates channels of a desired signal and at least one interference signal, estimates noise, calculates a mean interference power of each interference signal, and calculates a mean noise power. The channel compensator channel-compensates burst data. The demodulator calculates a noise variance value by adding the mean noise power to the at least one mean interference power and creates Log Likelihood Ratio (LLR) by demodulating the channel-compensated data.