Terahertz (THz) communication is being considered as a potential solution to mitigate the demand for high bandwidth. The characteristic of THz band is relatively different from present wireless channel and imposes technical challenges in the design and development of communication systems. Due to the high path loss in THz band, wireless THz communication can be used for relatively short distances. Even, for a distance of few meters (>5 m), the absorption coefficient is very high and hence the performance of the system is poor. The use of multiple antennas for wireless communication systems has gained overwhelming interest during the last two decades. Multiple Input Multiple Output (MIMO) Spatial diversity technique has been exploited in this paper to improve the performance in terahertz band. The results show that the Bit Error Rate (BER) is considerably improved for short distance (<5 m) with MIMO. However, as the distance increases, the improvement in the error performance is not significant even with increase in the order of diversity. This is because, as distance increases, in some frequency bands the signal gets absorbed by water vapor and results in poor transmission. Adaptive modulation scheme is implemented to avoid these error prone frequencies. Adaptive modulation with receiver diversity is proposed in this work and has improved the BER performance of the channel for distance greater than 5 m.