This paper investigates the performance of an Alamouti coding based transmit diversity scheme with multiuser max-scheduling in spatially correlated channels. An exact closed form of ergodic capacity is derived, and bit error rate (BER) analysis is performed with a log likelihood radio (LLR) approach for two transmit antennas case. Our analytical and numerical results verify a positive effect of spatial correlation on multiuser diversity in terms of ergodic capacity. We show, however, that spatial correlation is beneficial in terms of BER until a certain signal-to-noise ratio (SNR) level while it hurts BER as SNR increases compared with ergodic capacity.